Norway’s NOK12.2trn (€1.21trn) sovereign wealth fund has cut Chinese pharmaceutical company Yunnan Baiyao out of its investment universe and put Brazil’s Marfrig Global Foods under observation – with both changes based on environmental considerations.

Norges Bank Investment Management (NBIM), which runs the Government Pension Fund Global (GPFG), announced this morning that it had opted to exclude Yunnan Baiyao due to “unacceptable risk that the company contributes to serious environmental damage”.

As for Marfrig Global Foods, NBIM said the stock was going on its watch list for the same reason.

NBIM said both moves are being made based on recommendations from its Council on Ethics.

According to council, Yunnan Baiyao – which produces ingredients used in Traditional Chinese Medicine (TCM) – uses and sells body parts from pangolins, which is a globally-endangered species.

Regarding Marfrig, one of Brazil’s largest producers of beef, the council said the most important regions from which the firm bought beef cattle were the Amazon and the Cerrado in Brazil.

“Cattle ranching is the main reason for the loss of forest cover and biodiversity in these regions and is linked to conversion of forest to pastureland,” the council said on its website.

Marfrig announced in 2020 that it would eliminate deforestation throughout its entire supply chain and in all regions by 2030, the council said.

“Even though the Council finds that the timeframe for when this will be achieved is too long and it is unclear how Marfrig’s system will work in practice, the Council considers that these initiatives can reduce the risk of Marfrig contributing to deforestation in the future,” the Norwegian organisation said.

At the end of 2020, the GPFG had $23.6m invested in Yunnan Baiyao, and some $4.4m invested in Marfrig stock, according to NBIM’s website.

In October, NBIM said it had decided to exclude four Chinese firms due to concerns about endangered species being used in their TCM products.

Looking for IPE’s latest magazine? Read the digital edition here.