By Gwladys Fouche
OSLO, May 12 (Reuters) – When Norway’s $2.2 trillion wealth fund — the world’s largest — sells a company’s shares over ethical concerns, should it explain why? This seemingly simple question has become a dilemma for its guardians, the finance minister told Reuters, as a government commission reviews the rules that have made the fund a global benchmark for ethical investing.
“It is not just about divesting, one must publish a reason,” Jens Stoltenberg said in an interview.
“I see that this creates some dilemmas. This is why I am glad we have a commission not only assessing whether we should make divestments, but also the reasoning that can contribute towards reinforcing the impact (of a divestment).”
The sovereign wealth fund established in the 1990s is governed by ethical guidelines set by parliament that ban it from investing in companies that breach human rights or pollute the environment, among other things.
Civil society groups worry that the commission, which is due to present its recommendations in the autumn, may weaken the rules to appease U.S. President Donald Trump.
In November, parliament voted to pause the fund’s ethical divestments and ordered the guideline review following intense scrutiny from the United States over the fund’s divestment from U.S. company Caterpillar over the use of its bulldozers in Gaza and the occupied West Bank.
Some opposition politicians have said the suspension and review were motivated by concerns over upsetting Trump, given that more than half of the fund’s assets are in the U.S. and could risk being seized by U.S. authorities. The Norwegian government strenuously denies that.
CONCERN
Questioning the transparency of the fund’s ethical divestments has rung alarm bells among civil society groups, who say it provides a key source of information for the general public and investors alike.
Prior to the suspension, an independent ethical watchdog, the Council on Ethics, made recommendations to divest and sent them to the board of the central bank, which had the final say. The board tended to follow the council’s recommendations, but not always.
Once the fund sold out of a company, the council published its recommendation in full, including its reasoning, based on months – sometimes years – of investigations, providing a unique source of information for the public and other investors at home and abroad.
“The strength of the fund has been that it is public and that the Council on Ethics has given such thorough reasonings and documentation for its recommendations,” said Ingunn Eriksen, an advisor at Norwegian trade union Fagforbundet.
“If that openness disappears, it will be very difficult for other investors to learn from it,” she said.
NO PUBLIC DIVESTMENTS
Since the suspension, all recommendations have been sent to the fund’s operator, Norges Bank Investment Management (NBIM), with no divestments made.
Should the current system continue, said Lucy Brooks, sustainable finance adviser at environmental group Framtiden I Vaare Hender (Future in our Hands), it would mean fewer ethical divestments by other investors globally.
“Internationally, it would be a massive loss because there is no one else doing that,” she told Reuters.
“Even the Danish pension funds, who are quite good at excluding fossil fuels producers and other companies, they lean on what the (Norwegian) fund says. It has been a beacon of information and openness.”
NECESSARY MEASURE
Stoltenberg said it had been crucial to pause the ethical divestments as the fund finances 25% of public spending at a time when a significant part of its value depends on a handful of companies, mostly U.S. tech giants such as Nvidia, Meta or Amazon, that the fund might have to divest from should there be a recommendation to divest.
“Then we would not be a broadly invested index fund,” he said.
The existence of the ethical rules doesn’t appear to be in doubt, however; Stoltenberg said parliament is unanimously in favour of them.
The head of the government commission reviewing the guidelines did not reply to a request for comment.
Fund CEO Nicolai Tangen declined to comment until the recommendations of the commission are out. But he said that after they are published the fund would have a view on the degree of transparency it should have on divestments.
(Reporting by Gwladys Fouche in Oslo; Editing by Hugh Lawson)
Comments