NORWAY - Norway is reviewing whether the current Gaza conflict means its state pension fund is breaching ethical guidelines.

The Council on Ethics has been asked by the government to review the investments by the Government Pension Fund - Global in companies with activities in the territory.

Since 2008 the Israel equity market has been included in the fund's benchmark, which the Ministry of Finance said had resulted in the pension fund being invested in "a growing number of Israeli companies".

Kristin Halvorsen, minister of finance, said: "Due to the present situation in Gaza, I have asked the Council on Ethics to give an account for the Council's work on cases relating to companies with activities in the areas in question."

Under the ethical guidelines laid down for the pension fund, the Council on Ethics can recommend exclusion of companies from the investment universe if there is a considerable risk of contributing to issues such as serious or systematic human rights violations and serious violations of individuals' rights in situations of war or conflict.

Halvorsen added: "Investments in companies, who are found to contribute to occupation of territory in breach of international law, or suppression of the population in occupied territory, may be deemed to be in breach of both these alternatives."

A list of the Government Pension Fund - Global's equity and fixed income holdings at 31 December 2007 revealed that even before the equity market became part of the benchmark the fund held stocks in 12 Israeli companies, with the largest ownership stake of 1.8% held in Emblaze Ltd, while the largest investment of NOK177m (€18.8m) was in Israel Chemicals ltd.

Other investments at the beginning of 2008 included Bank Hapoalim BM, Check Point Software Technologies and Partner Communications, while the pension fund also held fixed income instruments in three Israeli entities, the State of Israel, Teva Pharmaceutical Industries and Israel Electric Corporation.

Halvorsen highlighted that the Council on Ethics "has on different occasions, from 2006 until 2008, considered possible contributions to human rights violations or other ethical norms through investment in Israeli companies".

She added that the Council has also looked into whether investments in non-Israeli companies, but who have activity in or deliver goods or products to Israel, can constitute contribution to unethical conduct.

Halvorsen admitted that the Council has not yet recommended any exclusions on such grounds, and although a recent review in June of investments in the Israel Electric Corporation - following reports it had reduced the electricity supply to Gaza - resulted in the Council not excluding the firm, it warned that it "may renew its assessment of the fund's investment" in the firm if the actions were repeated. (See earlier IPE article: Norway consults on ethical pension guidelines)

The Ministry of Finance is currently reviewing the existing ethical guidelines for the pension fund, with the results due to be published in a white paper on the management of the pension fund in the spring.

Halvorsen added: "In connection with this review, we will evaluate whether the Ethical Guidelines adequately addresses questions regarding companies' contribution to unethical conduct in conflict zones. It is, however, important to bear in mind that it is not the purpose of the Government Pension Fund - Global to serve as a foreign policy instrument."

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