Norway’s giant sovereign wealth fund is set to bring several large engineering stocks back into its portfolio, if an official proposal to allow it to invest in nuclear weapons manufacturers is adopted.
The proposal is one of the changes put forward by the commission led by former Norwegian central bank governor Svein Gjedrem, which was tasked last year with rethinking the Government Pension Fund Global’s (GPFG) ethical framework following a backlash against the blacklisting of US blue chip Caterpillar because Israel was using its bulldozers to destroy Palestinian property.
Publishing its report yesterday, the committee said that since parts of the fund’s framework were suspended on the day the committee was appointed, at parliament’s request, it was a priority to make sure all instruments used in responsible investment could be quickly brought back into use.
“A clear and well-grounded framework for responsible management contributes to trust in and the legitimacy of the fund,” the panel said in a press release.
Key proposals in the lengthy report include keeping the GPFG’s ethical council but shifting more responsibility to Norges Bank; allowing the bank to keep the council’s recommendations on companies secret under some circumstances, and letting it keep companies falling foul of its ethical code in its portfolio for longer.
Justifying the changes, the committee said there had been new developments since the ethical framework was last assessed – such as the fund’s value having increased substantially, the fund making up a large proportion of public spending in Norway, changes to expectations of responsible business and capital management – and Norges Bank’s responsible investment work having developed.
The experts also pointed to concerns about how the fund might be seen abroad.
“Because the fund is state-owned, Norges Bank, as manager, should, when choosing tools, be mindful of, among other things, the risk that the fund may be perceived as a political actor acting on behalf of the Norwegian government,” the committee said.
The committee proposed retaining the criterion in the fund’s guidelines for excluding companies producing nuclear weapons – but said its scope should change.
“The fund is not to be invested in companies that produce nuclear weapons, unless the company is domiciled in a nuclear-weapon state under the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) that is allied with Norway.”
“Several European and American companies that produce components for nuclear weapons can therefore be reincluded,” the committee said, adding that the global security situation had changed.
“Norway is building up its defence capabilities, and the protection provided by NATO’s nuclear umbrella has become increasingly important. The companies that would be reincluded produce weapons that Norway needs for its own defence,” it said.
Currently, 14 companies are excluded from the GPFG on the grounds of nuclear weapons production, including Airbus, Boeing, BAE Systems, General Dynamics, Lockheed Martin and Safran, according to Norges Bank Investment Management’s (NBIM) website.
These stocks make up around 1% of the MSCI ACWI, according to IPE’s estimate produced with AI assistance, suggesting that re-inclusion could therefore amount to a fund change worth some NOK164bn.
Receiving the report yesterday, finance minister Jens Stoltenberg said the government would now study the committee’s recommendations and facilitate a broad public debate.
“Only once this process is complete – and both the report and the consultation responses have been carefully evaluated – will the government reach its conclusions,” he said.
