KLP has axed 12 companies from its emerging market investment universe over concerns about human rights and the energy transition.
The NOK972.3bn (€86.2bn) Norwegian pension fund assessed listed companies in Gulf States that are included in the MSCI Emerging Markets Index.
The assessment included talking to NGOs and public officials, as well as using benchmarks of civil, political and workers’ rights around the world, and considering media reports and corporate disclosures.
“This assessment has now been completed. Companies in the Gulf States may now be included in KLP’s portfolios, with the exception of the excluded companies,” said KLP in a statement.
The exclusions, which took effect in December, are mainly related to the building and construction, property, and telecommunications sectors, which the fund said had particularly high human rights risks in the region.
The companies removed from the investment universe are: Saudi Aramco, Emirates Telecom Group, Saudi Telecom, Emaar Properties, Aldar Properties, Etihad Etisalat, Mobile Telecommunications (Kuwait), Dar Al Arkan Real Estate Development, Ooredoo QPSC, Mobile Telecommunications (Saudi Arabia), Mabanee and Barwa Real Estate.
KLP said it “considers that there is an unacceptable, sector-specific risk of contributing to human rights abuses” at each company.
In the case of Saudi Aramco, the exclusion was made “on the basis of its close ties to a dominant state owner, combined with an active position in violation of KLP’s expectations with respect to climate change mitigation and energy transition plans”.
Saudi Aramco is the largest oil and gas company in the world, and has been the subject of ongoing controversy about its contribution to the climate transition.
Because it is largely state owned, the firm has very little listed equity. But in 2020, investor initiative Climate Action 100+ added Saudi Aramco to the list of companies it would engage with, suggesting a significant number of its members had starting buying its bonds.
KLP, however, will exclude the company, saying: “Since the Saudi state owns 90% of the shares in Saudi Aramco, it is, in practice, difficult for other shareholders to influence the company through the exercise of active ownership. As such, the company appears to be associated with a particularly high level of risk.”
Since it was added to its engagement list, CA100+ has scored Saudi Aramco poorly on most of the key indicators of climate progress. Carbon Tracker named the firm the worst-performing of the world’s 25 largest oil and gas producers when it came to transition planning.
“Close links between the state and the company result in a significant overall ability to leverage power and influence in favour of a climate and energy transition policy that runs counter to KLP’s goals,” the fund explained.
KLP told IPE that, in total, the equivalent of $15m had been sold as a result of its latest round of exclusions.
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