Norway may blacklist firms over emissions, corruption

Carbon emissions are a new criteria for the sovereign wealth fund

OSLO: The watchdog for Norway’s $900 billion (R11 trillion) sovereign wealth fund will recommend this year that the fund exclude or put on a watch list several firms in the oil, cement and steel industries for emitting too much greenhouse gas.

Carbon emissions are a new criteria for the fund, which was built up from the proceeds of Norway’s own large oil industry and operates under ethical guidelines set by parliament.

The chairperson of the fund’s independent Council on Ethics, Johan H. Andresen, acknowledged what he called the “duality” of a fund based on oil divesting over emissions, but said his job was to execute rather than set a mandate.

The fund may also exclude several firms in the defence, telecoms and arms industries this year over the risk of corruption, he said. The council’s recommendations go to the board of the central bank, which usually follows its advice.

Speaking ahead of publication of the council’s annual report yesterday, Andresen said it was already working on the first recommendation over emissions, expected to come by July.

“It will be a company either in the oil or concrete industry ... We have to start with the worst and make our way through the industries,” he said, adding that there would be a “small handful” of recommendations to the board this year.

Andresen said the ethics panel would open a probe into the risk of corruption in the pharmaceuticals sector and investigate possible human rights abuses among firms recruiting staff for work in the Gulf states – including a “well-known Western” firm.

It will also investigate reported abuses in the textile industry in India and Bangladesh.

The fund has stakes of more than 2% in 1 158 companies, more than 5% in 28 companies and an average stake holding in Europe of 2.3%. Such a wide spread makes it difficult to identify which companies it is investigating.

The ethics procedure was launched at the start of the millennium and 65 companies are excluded on recommendations by the Council on Ethics. Another 69 are excluded directly by the central bank based on their dependence on thermal coal.

The fund sells shares in any company it wishes to drop gradually, before any announcement, but being dropped or named as a source of concern can damage a company’s investment image. Andresen said the main aim was to remove the ethical risk.

The fund is forbidden by law from investing in firms that produce nuclear weapons or landmines, or are involved in serious and systematic human rights violations, among other criteria.

Following a three-year study on the risk of corruption in the telecoms, defence and energy industries, the council has sent up several recommendations to the board of the central bank to either exclude or observe companies in these sectors.

The council will also look into reports by rights groups of slavery-like conditions for North Koreans employed by companies in Eastern Europe, mostly in the manufacturing of heavy goods.

On the issue of recruitment for work in the Gulf states from other parts of Asia, Andresen said he was optimistic over the process of talks with the Western company he mentioned.

Last year, the council looked into the construction industry in Qatar – host of the 2022 soccer World Cup – and neighbouring countries, after reports of abuse by human rights groups.

Andresen cited one unnamed firm which he said had reported reducing its corruption risk and also saving money by cutting the number of middlemen.

“Others are much more, ‘let’s just see what happens, we don’t think we are guilty, these were some bad apples’.” – Reuters