NORWAY - The Norwegian Ministry of Finance has confirmed the existing ethical guidelines used by the Government Pension Fund - Global are to be replaced with two new sets of guidelines on responsible investment, following a review last year.

The Ministry of Finance issued a consultation in June 2008 on evaluating the existing guidelines that had been in place since 2004, which included consideration of a number of issues such as the introduction of addition exclusion criteria. (See earlier IPE article: Norway consults on ethical pension guidelines)

Sigbjørn Johnsen, the minister of finance, said the government is retaining "several important elements from the ethical guidelines, as well as introducing a number of measures". These are linked to active ownership and exclusion of companies, with tobacco production introduced as a new criterion for exclusion. This has already led to the Government Global fund excluding 17 tobacco companies from the investment universe in January 2010. (See earlier IPE article: Norway-Global gives up tobacco)

As a result of the review, which was completed in 2009, the ethical guidelines will be replaced by two new sets of guidelines:

Work linked to exclusion and observation of companies, Norges Bank's work on responsible management and exercise of ownership rights

The first set of guidelines will enable a slightly broader assessment of the situation before a company is excluded on ground of grossly unethical behaviour. As Johnsen explained, "in some cases it is more useful to put a company under observation than to exclude; for example if there is uncertainty about how the situation will develop".

The Ministry will then closely monitor the companies on the watch list to see if they implement measures to remedy the situation, before a final decision is made on exclusion, or whether it intends to use alternative measures if it believes active ownership or observation might reduce the risk of continued violations.

Johnsen noted the guidelines for Norges Bank includes an "ambitious requirement of generally integrating considerations of good corporate governance and environmental and social issues into investment activities", in order to reflect international developments.

In particular the guidelines stipulate that Norges Bank, which manages the Government Global pension fund, should actively contribute to the development of international standards relating to responsible investment and active ownership, while new requirements have been established in relation to transparency and reporting by the bank.

Johnsen added: "We are also well underway with implementation of other measures that were decided in connection with the evaluation. These include an environmental investment programme and a major research project on climate change and its possible impacts on the financial markets".

And following a recommendation from the Council on Ethics, the Ministry of Finance has agreed to reverse the decision to exclude United Technologies Corp from the investment universe of the Government Pension Fund Global.

The company was previously excluded from the fund in January 2006 on the basis that it was involved in the manufacture of nuclear weapons through its involvement in upgrades and testing of engines for the US' MX ICBM system.

However, the Ministry noted that "following disarmament of the US nuclear arsenal, this weapons system has been dismantled and upgrades of the system no longer take place". It therefore followed the recommendation to no longer exclude United Technologies from the pension fund.

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