Norway’s sovereign wealth fund is banishing a Chinese energy stock from its NOK15trn (€1.28trn) portfolio because of environmental risks arising from an Indonesian hydropower project located in the habitat of the world’s most endangered orangutan species.
Norges Bank Investment Management (NBIM), which runs the Government Pension Fund Global (GPFG), also announced last night that it is putting UK-listed energy-services firm Petrofac under extra scrutiny because of concerns about links to corruption.
The GPFG’s Council on Ethics – which makes recommendations to Norges Bank on exclusions – said PowerChina’s subsidiary Sinohydro Corp was responsible for the construction and operation of the Batang Toru hydropower project in North Sumatra, and was located in a designated “Key Biodiversity Area”, which was also home to the critically-endangered Tapanuli orangutan.
“The Tapanuli orangutan is the most endangered of all the great apes,” the panel said, adding that there were now fewer than 800 individual animals in the Batang Toru forest – the species’ only remaining habitat worldwide.
“The Council concludes that the construction of the hydropower project in Batang Toru will have a destructive and permanent impact on the environment, which will pose a serious threat to the survival of this orangutan species as well as other critically-endangered species,” it said.
The council said PowerChina had not replied to its queries.
IPE has contacted PowerChina for comments on NBIM’s decision to exclude it.
Meanwhile Petrofac, which designs and builds infrastructure for oil and gas production, is being put under observation for three years due to “unacceptable risk of gross corruption or other serious financial crimes”, NBIM said – another move based on a Council on Ethics recommendation.
The council said a verdict against the company had acknowledged that Petrofac had strengthened its compliance organisation and taken other action since the corrupt acts took place, but uncertainty remained over some elements of its compliance programme and corporate governance as well as the culture the firm “now claims to have implemented”.
Responding to NBIM’s decision, a spokesperson for Petrofac told IPE: “The SFO’s [UK Serious Fraud Office] investigation into Petrofac concluded in October 2021 and all penalties imposed by the Court have been paid by the company. Today Petrofac has a comprehensive and robust compliance and governance regime.”
The fund-management arm of the Oslo-based central bank also said in the announcement on its active ownership work that it had decided to end the “special exercise of ownership” it had been conducting around Indian agrochemicals multinational UPL.
That company – in which the GPFG had NOK1.42trn invested at the end of last year, equating to a 2.22% stake in the firm – had been put under the spotlight in 2018 for a period of five years because of the use of child labour in UPL’s seed supply chain in India.
NBIM explained that period was now over, and “the forward-looking risk of violations appears reduced”.
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