By Valeria Criscione
Published: March 16 2009 02:00 | Last updated: March 16 2009 02:00
likes to think of itself as an ethical model for others. It spends 1
per cent of its gross national income on international development
assistance and $1bn (£723m, €783m) to save the rainforest in Brazil.
the paradoxes within one of its most visible efforts, the ethical
investment strategy of its government pension fund, show how difficult
it is to bridge the irreconcilable differences between the two main
purposes of the world's second largest sovereign wealth fund: to make
money while investing ethically. The most recent contradiction, and
probably most ironic, is the finance ministry's current consideration
of whether to exclude companies for carbon emission violations.
NKr2,275bn (£239bn, €258bn, $329bn) Government Pension Fund - Global,
originally known as the Petroleum Fund, is funded by revenues from
fossil fuels and even invests in oil companies. The government was
obliged to take up the matter after Norwegian environmentalist group
Bellona last year made a formal recommendation to the ministry as part
of a white paper on the fund's management to be submitted to parliament
on March 27.
The paper is the culmination of the most exhaustive
review of the fund's ethical guidelines since their introduction five
years ago. It will provide the eventual basis for any potential changes
to the guidelines this summer.
"Climate change was central [to
the public consultation process]," says Martin Skancke, finance
ministry director general for asset management. "But the advice was
broad, including positive screening, active ownership and separate
allocations towards green technology companies."
companies have also made recommendations in the current consultation
for the fund to abstain from tobacco company investments. The fund can
presently exclude tobacco companies on an ad hoc basis if their
marketing poses a serious violation of ethical norms. So far, none have
been excluded and in fact the fund has ownership in some of the major
tobacco companies, such as Altria and Philip Morris, according to its
The list of contradictions does not end there.
The fund has excluded Lockheed Martin from its investment portfolio,
yet the country buys its planes. The fund also temporarily blacklisted
US oil company Kerr McGee for pollution violations at a Western Sahara
project, despite a Norwegian company being involved in the project.
Norway has a formal ethics council for the Government Pension Fund -
Global, but cannot present conclusive evidence that ethical investing
pays off financially.
"It's not difficult to find the paradoxes
in this," says Gro Nystuen, chair of the ethics council. "But if you
try and do everything 100 per cent, it is paralysing."
is one of five council members, part of whose job it is to recommend
which companies to exclude. She says the ethical part of the government
pension fund's investment strategy dates back to the late 1990s when
journalists unearthed an embarrassing revelation about the fund's
investment in a Singapore company involved in anti-personnel land mines
shortly after Norway hosted the international Land Mine Ban conference
in Oslo. The situation prompted the eventual formation of the
independent advisory council on ethics in 2004.
The blacklist of
excluded companies comprises polluting miners, weapons producers and
companies with labour violations. The council gets its leads from the
Ethical Investment Research Service, a UK screening company that looks
at the 7,000 companies in the fund's portfolio and mines for keywords.
Eiris sends the council the names of 40 to 60 possible offenders every
month. The council also gets tips from non-government organisations and
The fund recently excluded investments in Canadian
mining company Barrack Gold for environmental damages and US company
Textron for cluster weapons production. There are currently 29
companies excluded from the fund's investment portfolio.
The council's work has been conducive to changing the way some companies behave.
is a key example. The council initially recommended in 2006 that the
finance ministry exclude the US agricultural company because of its use
of child labour in its cotton seed production in India. But after
working together with the company, and even going so far as to
physically go into the fields and count children, the ministry decided
last year to keep Monsanto because it had made significant improvements.
fund's ethical investment strategy has also been influential in
changing the way other pension funds invest. The Swedish AP Fund was
persuaded to disinvest in Wal-Mart following Norway's lead; Norwegian
pension fund KLP has followed the government pension fund's
recommendations, and the fund has influenced the New Zealand
Latest government rulings
finance ministry announced last Friday that it would exclude Dongfeng
Motor, the Chinese company, from the funds investments for selling
military trucks to Burma. This is the first time the criteria regarding
the sale of military materials to Burma has been applied since it was
set up late last year.
The ministry also placed Siemens, the German group, under observation for four years.