Nor­way's oil fund ex­cludes 4 Asian com­pa­nies

The Pak Banker - - BUSINESS -

Nor­way's $870bn oil fund ex­cluded four of Asia's big­gest com­pa­nies be­cause of con­cerns over se­vere en­vi­ron­men­tal dam­age at In­done­sian palm oil plan­ta­tions.

In the first use of a new pro­ce­dure, Nor­way's cen­tral bank de­cided the world's largest sov­er­eign wealth fund should not be able to in­vest in Dae­woo In­ter­na­tional and Posco of South Korea, and Gent­ing and IJM of Malaysia. The four Asian com­pa­nies join more than 50 com­pa­nies that are ex­cluded by the oil fund, in­clud­ing Boe­ing, Bri­tish Amer­i­can To­bacco, Rio Tinto and Wal­mart. De­ci­sions from the oil fund, which owns on av­er­age about 1.3 per cent of ev­ery stock in the world, are closely fol­lowed by other in­vestors on eth­i­cal mat­ters.

Mon­day's ex­clu­sions mark the first time that Nor­way's cen­tral bank made the fi­nal de­ci­sion rather than the min­istry of fi­nance in an ef­fort to de­politi­cise the fund. The cen­tral bank acted on rec­om­men­da­tions from the coun­cil of ethics, which over the past year is­sued warn­ings on all four com­pa­nies.

The coun­cil warned that in­dus­trial group Dae­woo and its par­ent com­pany, steel­maker Posco, should be ex­cluded be­cause of risks over the con­ver­sion of trop­i­cal forests in In­done­sia into palm oil plan­ta­tions. The oil fund owned 0.9 per cent of Posco at the end of 2014, worth $198m, and 0.3 per cent of Dae­woo, worth $9m.

Gent­ing and IJM, two of Malaysia's lead­ing con­glom­er­ates fo­cused on casi­nos and con­struc­tion re­spec­tively, were also ex­cluded be­cause of In­done­sian palm oil plan­ta­tions. The oil fund owned 0.4 per cent of Gent­ing, worth $41m, and 1.6 per cent of IJM, worth $46m, as of the end of 2014. It nor­mally sells out of its po­si­tions be­fore ex­clud­ing com­pa­nies.

In all four cases, Norges Bank's ex­ec­u­tive board de­cided there were no other op­tions open - such as for­mal protests or en­gage­ment with the com­pa­nies - than di­vest­ment. The board will meet four times a year to con­sider ex­clu­sions.

Civil ac­tivists had grown frus­trated with Nor­way's re­cent per­for­mance on ex­clu­sions. Af­ter a high-pro­file start in which it ex­cluded pro­duc­ers of to­bacco and weapons such as nu­clear and clus­ter bombs, sev­eral de­ci­sions on di­vest­ments had lan­guished in bu­reau­cratic limbo be­tween the coun- cil of ethics and the fi­nance min­istry. But pres­sure groups are also wary of giv­ing too much power to the cen­tral bank, an arm of which - Norges Bank In­vest­ment Man­age­ment - man­ages the oil fund. In turn, ex­ec­u­tives within the oil fund are wor­ried about be­ing per­ceived as a po­lit­i­cal tool in the coun­tries they in­vest in.

Yngve Slyn­gstad, NBIM's chief ex­ec­u­tive, has been po­si­tion­ing the fund as a more ac­tive in­vestor in cor­po­rate gov­er­nance mat­ters, en­gag­ing more with com­pa­nies on is­sues such as cli­mate change and chil­dren's rights.

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