NORWAY – New proposals for the 86.5 billion euro Norwegian Government Petroleum Fund suggest imposing constraints that will see the fund invest only in ethically sound securities.
A committee, appointed by the government to propose ethical guidelines for the fund, is proposing that the Petroleum Fund should not invest in companies that produce strategic components for certain categories of weapons. It is also proposed that the Ministry of Finance should draw up guidelines for Norges Bank’s corporate governance policy that take account of ethical as well as financial considerations. Finally, it is proposed that, in cases where there is significant risk of contributing to obviously unethical actions, the company in question should be excluded from the investment universe.
The following three methods have been proposed by the committee as a basis for the ethical guidelines:
1) A corporate governance policy targeting long-term financial returns, mainly on the basis of the UN Global Compact and the OECD Guidelines for Multinational Enterprises. The manager of the Government Petroleum Fund, Norges Bank, shall be responsible for the implementation of this policy.
2) The negative screening of companies from the investment universe that produce, either themselves or through entities under their control, strategic components for weapons that cause particularly widespread civilian suffering.
3) The exclusion of companies from the investment universe that pose an unacceptable risk that the Fund might contribute to unethical actions or omissions, such as the violation of fundamental humanitarian principles, grave violations of human rights, gross corruption or severe environmental degradation.
The committee expects the constraints to have little effect on the fund’s long term returns.
While presently only at the proposal stage, the guidelines throw into question the effects on the existing mandates and managers, if they become accepted.
The Petroleum Fund was established in 1990 to aid the management of fiscal policy, and ease the Norwegian economy’s long-term challenges. These are partly related to the eventual decline in the petroleum revenues and partly to the ageing population, which will give rise to substantial increases in pension expenditure and a growing need for nursing and care services