NORWAY – The Norwegian finance ministry has decided to exclude two companies from the Norwegian Pension Fund Global's (NPFG) investment universe for producing tobacco.

The companies, China's Huabao International Holdings and US-based Schweitzer-Mauduit, were excluded on recommendation from the fund's Council of Ethics, resulting in the sale of NOK215m (€28m) worth of shares.

Both firms produce reconstituted tobacco leaf (RTL), which the ministry said could account for as much as 15% of tobacco in cigarettes.

Explaining its decision to recommend exclusion, the Council's report claimed Schweitzer-Mauduit was responsible for the production of around 75,000 tonnes of RTL last year – around half of global production – and noted its plans to increase output by one-third through a new plant in China by 2014.

Similarly, Huabao said in a recent annual report that it produced around 20,000 tonnes of tobacco a year.

At the end of last year, the NOK4.1trn fund held a 1.9% stake in Huabao, valued at NOK164m, while its interest in Schweitzer-Mauduit was worth nearly NOK50m, accounting for 0.68% of the company.

While the council's recommendations were submitted to the ministry in late January, it noted that the decision had not been made public until after all shares in both companies had been sold.

The sale of the companies is in line with NPFG's guidelines not to invest in tobacco companies.

In early 2010, it decided to exclude 17 companies from its investment universe after the rule was introduced.

It recently excluded an Israeli property company over concerns it was violating the Geneva Convention through its involvement in settlement construction.