Norway oil fund exits Rio Tinto on ethical grounds

By John Acher

OSLO (Reuters) - Norway on Tuesday excluded iron ore miner Rio Tinto (RIO.AX)(RIO.L) from its $375 billion (212.8 billion pounds) sovereign wealth fund due to environmental concerns over its activities in Indonesia, as part of its drive for ethical investment.

Norway's Government Pension Fund -- Global, familiarly known as the "oil fund", invests under ethical guidelines set by the government. In the past it has excluded companies producing nuclear arms or cluster munitions and ones deemed to have caused environmental damage or abused workers' or other human rights.

The fund invests Norway's oil and gas wealth in foreign stocks and bonds, is Europe's biggest equity investor and holds on average over 1 percent of European listed shares.

Finance Minister Kristin Halvorsen said the problems with Rio Tinto, the world's second-largest iron ore miner, concerned a joint venture with Freeport McMoRan (FCX.N), a group excluded by the fund in 2006, at their Grasberg mine in Indonesia.

Rio Tinto has a 40 percent stake in the mine, which is operated by Freeport McMoRan, a Rio Tinto spokesman said.

"We do not want to contribute to serious environmental damage," Halvorsen told a news conference.

"The Grasberg mine discharges very large amounts of tailings directly into a natural river system; approximately 230,000 tonnes or more per day," the finance ministry said in a statement, adding that it did not foresee any change.

Rio Tinto's spokesman Nick Cobban in London said: "Our immediate response is one of surprise and disappointment."