NORWAY - The Norwegian finance ministry has declined to confirm or deny a report that the Government Pension Fund - Global may withdraw investment from German arms maker Rheinmetall.

The NOK1.8trn (€221bn) fund said yesterday that it dropped South African gold mining company DRD Gold over environmental issues.

Now Rheinmetall might be the next company to be excluded from the fund's investment universe if its ethical council finds proof of involvement in cluster bomb production, according to a report in the Dagbladet daily.

"We cannot confirm or deny anything about a company until a possible exclusion to ensure an appropriate divestment process, should that be necessary," a spokesman for the finance ministry told IPE.

According to Human Rights Watch and other anti-weapon organisations, Rheinmetall produces parts for cluster bombs and bomblets, which are solely used against "soft targets", that includes humans.

The ministry spokesman added that should the allegations of involvement in cluster bomb manufacturing prove to be true this would be against the fund's ethical investment guidelines. Currently the fund holds NOK81m in Rheinmetall.

Last year, the Belgian bank and insurance group KBC dropped Rheinmetall from the investment portfolio of its funds along with 16 other companies which were regarded as being involved in cluster bomb production.