Norway fund may blacklist emissions culprits

THE ethics watchdog for Norway’s $900-billion (about R1.2trillion) sovereign wealth fund will recommend that the fund exclude or put on a watch list several firms in the oil, cement and steel industries that emit 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 world’s largest sovereign wealth fund, it has shares in 9 000 companies, 1.3% of the entire world’s listed equity, giving the decisions considerable weight among investors.

The chairman 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.

In an interview ahead of publication of the ethics council’s annual report this week, 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 ethics procedure was launched at the start of the millennium, and 65 companies are presently excluded on recommendations by the ethics council on various grounds.

Another 69 companies 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 humanrights 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 several recommendations to the board of the central bank to either exclude or observe companies in these sectors.

“They have the same type of risk elements: large contracts, government as a counterpart, lack of transparency and/or desire to keep things secret and a large number of middlemen. When you add them, they constitute a greater risk of corruption,” Andresen said.

The pharmaceuticals industry had the same elements of risk, he said. “We have received indications that there is a risk of corruption.” —