The BHP Group Ltd (ASX: BHP) share price could soon face a wall of selling along with other popular ASX stocks after Norway's parliament passed new investment rules that would force its pension fund to divest stocks linked to fossil fuels.
The new rules set limits on how much a company can be exposed to oil and coal before being excluded from the country's Government Pension Fund, which is ironically also called the "Oil Fund", according to the Australian Financial Review.
While it isn't immediately clear if BHP meets the criteria after it sold its shale assets in the US, but if it is swept up in the changes, the stock will be one of the most impacted on the S&P/ASX 200 (Index:^AXJO) (ASX:XJO) index from the Norwegian sell-down.
ASX stocks caught in the Viking raid
This is because the Oil Fund owns 0.8% of BHP's ASX shares, or around 24 million shares. Fortunately, this alone shouldn't be enough to send the stock crashing although its shareholders could see some share price pressure as the number of shares held by the fund is equal to about four times the average daily trading volume.
It could be another story for BHP's London-listed shares as the fund owns 3.06% of the Big Australian's stock on the LSE, and there's a correlation between the share price movements on both exchanges.
Other stocks that could also feel some heat include the Santos Ltd (ASX: STO) share price and Oil Search Limited (ASX: OSH) share price as the Norwegians control just over 1% of the shares in both energy companies.
Not just oil, its coal too
Miner South32 Ltd (ASX: S32) could also fall out of the Oil Fund's portfolio as it digs up coal while utility AGL Energy Limited (ASX: AGL) could also lose favour for operating coal-fired power stations, although its adventurous bid for telecoms group Vocus Group Ltd (ASX: VOC) could save it as it will significantly lower its exposure to coal.
The change in investment criteria from Norway also comes at an interesting time for Australia with the approval of the Adani Carmichael Coal Mine in Queensland. While the state government succumb to pressure from voters to approve mine construction, some experts are warning of the risk of "stranded assets".
Financial institutions and the investment community are turning away from fossil fuels and that could leave such assets cut off from the global financial system. This may be one reason why the Norwegian parliament is changing the rules of engagement and it's something that ASX investors should keep at the back of their minds when making investment decisions.
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