NORWAY – The Norwegian ministry of finance has decided not to continue the Petroleum Fund’s relationship with ethical consulting firm Caring Company/Etikanalytikerna.

“The Ministry of Finance has terminated the agreement with CaringCompany/Etikanalytikerna,” the ministry said. The Swedish company says the fund was only testing its product.

The ministry said the fund’s internal Council on International Law was “highly critical” of a March 30 CaringCompany report into whether there were companies in the fund’s portfolio that were engaged in unethical business practices.

The ministry said the fund committee did not find CaringCompany’s method “appropriate”. “The ministry has not found grounds for excluding companies from the Petroleum Fund on the basis of CCEA’s CaringCompany’s recommendations.”

CaringCompany managing director Magnus Furugard said the fund was testing its product for six months and that no contract had been signed. He said the “expectations were different from our side and their side”.

“The screening model we provided was not what they wanted,” Furugard said. He said the fund had a “very limited budget” and that it took a very small part of CaringCompany’s product. “It’s a difficult process for them,” he said, referring to the fund’s attempts to develop an ethical approach to investing.

The Norwegian parliament, the Storting, will deliberate ethical guidelines for the fund when it discusses the revised national budget for 2004. The ministry says it does not intend to hire another consultancy to review the fund’s portfolio.

Meanwhile, the Petroleum Fund outperformed its benchmark by 0.3 percentage points in the first half of 2003, according to 2004 budget documents released by the government.

“From the beginning of 1997 until the end of the first half of 2003, the average annual excess return, including the Environmental Fund, has been 0.4 percentage point,” it added.

It says the fund is set to reach 857 billion crowns (104.4 billion euros) by the end of this year.

“By the end of the second quarter 2003, the market value of the Government Petroleum Fund was 775 billion crowns,” the government said – a rise of 166 billion crowns since the start of the year. “The market value is now estimated to grow to 857 billion crowns by the end of 2003 and to 966 billion crowns at the end of 2004.”

The ministry of finance says there will be no change to the fund’s investment strategy. Between 50-70% of the portfolio will still be invested in fixed income while 30-50% will be invested in equities.

The budget contains “a broad review of the fund’s investment strategy” - based on reports from Norges Bank and Mercer Investment Consulting. “The Ministry concludes that the overall investment policy should remain unchanged.”