Norwegian SWF blacklists firms on environmental grounds

14 May 2020

Elizabeth Pfeuti

EU regulation

Norway’s Government Pension Fund Global (GPFG), the world’s largest sovereign wealth fund, has announced the exclusion of 11 companies from its NOK10.1trn (£818.5bn) portfolio on environmental grounds.

Following advice from its ethics council, Norges Bank Investment Management (NBIM), which manages the investment portfolio, has sold stakes in Canadian Natural Resources, Cenovus Energy, Suncor Energy and Imperial Oil.

In a statement published on 13 May, NBIM cited the companies’ contribution to “unacceptable greenhouse gas emissions” from their involvement in oil sands production. It is the first time the fund has excluded companies on these grounds.

The Norwegian fund also cut Elsewedy Electric Company, an Egyptian energy group, and Brazilian mining giant Vale from its investment universe due to the “risk of contribution to severe environmental damage”.

Elsewedy’s exclusion related to its involvement in a hydropower development in Tanzania, NBIM said, while Vale’s exclusion stemmed from the fatal collapse of a tailings dam at Brumadinho in Brazil.

In a separate announcement, NBIM said it had also cut five companies from its portfolios due to their involvement in coal production. The fund brought in new guidelines for coal producers last year in an effort to reduce its exposure to fossil fuels.

The exclusions of Sasol, RWE, Glencore, AGL Energy and Anglo American were made by NBIM and were not reliant on advice from the ethics council.

It has also placed BHP Group, Vistra Energy, Enel and Uniper under observation for the same reason. NBIM will monitor the companies’ future plans for changes that might affect their coal output as a proportion of their business.

On the advice of the ethics council, NBIM has also excluded state-owned Brazilian company Eletrobras, the biggest utilities business in Latin America, citing human rights violations in connection with an energy development in the north of the country.

NBIM said it had taken a long time to sell some stakes “in a reasonable manner” due to the liquidity of some shares.

In addition, the fund manager has also readmitted two companies to its investment universe.

AECOM was initially blacklisted in 2018 due to its involvement in the production of nuclear weapons but has now exited this business line. Hong Kong-based Texwinca Holdings was excluded last year because of a “systematic breach of workers’ rights in factories owned by a subsidiary”. This subsidiary has now been liquidated, NBIM said.

The GPFG’s size is largely a result of Norway’s oil wealth, but in the past few years its management has sought to reduce the investment portfolio’s exposure to this commodity as well as other fossil fuels.

NBIM’s exclusion list now includes 142 companies including BAE Systems, Lockheed Martin and Serco. It has a further 24 companies under observation for potential future exclusion from the portfolio.

Reasons for exclusion include production of tobacco, involvement in nuclear weapons or cluster munitions, “gross corruption”, and violations of human rights.

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