Norway's SWF Accused of Multibillion Dollar Investments Supporting Abuse, Fueling Military Regime

(December 15, 2010) — A US-based lobby group has accused Norway’s $510 billion Government Pension Fund Global of infringing on ethical guidelines.

EarthRights International (ERI) concluded in a report released today that the sovereign wealth fund, the world’s second biggest, violated ethical guidelines with investments in oil and gas companies that operate in military-run Myanmar.

Norway’s sovereign wealth fund has historically been a leader in ethical investment, often affecting the behavior of corporations. The report by EarthRights may heighten pressure in preventing Western companies and investors from conducting business in Myanmar, which houses one of the world’s most repressive and abusive military regimes.

“Land confiscation, forced labor, and other abuses are happening now in connection to several large gas and oil pipeline projects in Burma,” said ERI Program Coordinator Naing Htoo, an author of the report, in a statement. “There’s every indication abuses connected to these projects will continue, and in some cases worsen,” he added.

The report showed that Norway’s sovereign wealth fund has $4.7 billion invested in 15 energy companies operating in Myanmar, including $2.6 billion in Total S.A., Europe’s third- largest oil company, and $908 million in Chevron Corp., the second-largest U.S. energy producer. ERI Senior Consultant Matthew Smith, an author of the report, added: “This report presents a distinct opportunity for Norway to do what is intended by its Ethical Guidelines. The Norwegian peoples’ money is invested in corporate human rights abuses while the Ethical Guidelines go unapplied. The ethics are broken but not beyond fixing.”

In 2004, Norway established the Ethical Guidelines to assess the ethics of the fund’s investments. Its Council on Ethics was later constructed to interpret the Guidelines. If the Council determines a company in the fund’s portfolio contributes to human rights or environmental violations, the Council is mandated to recommend that the Norwegian Ministry of Finance either observe or exclude the company from the Fund.

In other news, the value of Norway’s sovereign wealth fund, commonly known as the “oil fund”, rose 2.37% in November to about $524.6 billion, central bank data showed on Tuesday, providing further evidence supporting the effectiveness of responsible investment. Recent research by Trucost and RLP Capital — which compared the carbon footprints, performance, and risk characteristics of the eight largest traditional mutual funds and eight largest environmental, social, and governance (ESG) funds — demonstrated that responsible investing can provide investors with better risk adjusted performance. “I believe this study shows that ESG factors matter, and positive ESG factors can drive competitive advantage and deliver superior performance,” RLP Managing Director Bud Sturmak told aiCIO.