May 14, 2015 / 6:12 AM / 3 years ago

RPT-INTERVIEW-Norway's $900 bln fund seeks faster action against unethical firms

(Repeats Wednesday item)

* Aims to go after worst offenders

* Looking at around 40 potential offenders

* Already sold out of big firms over ethics violation

By Joachim Dagenborg and Balazs Koranyi

OSLO, May 13 (Reuters) - Norway’s $900 billion wealth fund, one of the world’s biggest investors, plans to move faster against firms in its portfolio that misbehave, weeding out the worst offenders and “crooks” that do not mend their ways, the fund’s new ethics chief said.

Johan Andresen, who heads the Council on Ethics, told Reuters that the fund hoped this push against unethical or illegal business practices would improve its investment returns and even “make the world a better place”.

The fund, which owns shares in over 9,000 firms and holds more than 1 percent of all global equities, has changed the way it handles ethical issues. The aim is to improve the behaviour of firms it considers the top offenders through dialogue, hoping to influence others along the way, Andresen said in an interview conducted on Wednesday.

“We simply can’t handle all the crooks so we try to focus on those who are the worst offenders, where the fund, by being invested, has a clear risk of contributing to grossly unethical practices,” said Andresen, a 53-year-old billionaire who also runs a family investment fund.

“By taking out the worst, the number two becomes the worst, which some have taken notice of,” Andresen said in his first interview since his appointment in December. “If they don’t sleep well at night, maybe they should do something about that.”

The fund, which manages Norway’s vast accumulated oil wealth, has become a more active investor in recent years.

It has pulled out of some sectors such as tobacco, and sharply scaled back its investments in others like coal and palm oil production for environmental reasons, while holding more meetings with companies over ethical issues.

The fund, which is run by the Norwegian central bank, has sold out of dozens of companies over the years, including the world’s biggest miners, nuclear weapons makers and firms guilty of human rights violations or corruption.

It had 2,600 meetings with firms in 2014, a big increase from recent years, and has started publishing how it plans to vote at some shareholder meetings, part of a process of becoming a more active investor.

Andresen, sometimes referred to as “Tobacco Prince” for his family’s past investment in the industry, said his council is looking into about 40 companies. The larger council secretariat is watching five to 10 times as many firms.

The council, which advises the central bank’s board, has not yet recommended pulling out of any company since Andresen’s appointment.

Selling out is not the ultimate aim and new internal processes, implemented late last year, make it possible for the council to be involved in the discussions with firms, instead of just making a hold or sell recommendation as in the past.


“In the coordination there will be dialogue and as long as we can see that we are making headway with the companies, we will continue that dialogue,” said Andresen, ranked by Kapital magazine as Norway’s fifth richest person with a wealth of $3.5 billion.

“If we see that there is no change in conduct ... and the risk prevails, then a (sell) recommendation will come or the fund will divest during the course of the work,” Andresen said in his small corner office overlooking the Oslo fjord.

The biggest challenge may be defining who is a worst offender and civil society groups have criticised the fund for lax standards, particularly when it comes to carbon emitters.

Andresen said the investments can be judged against standards set by the likes of the United Nations, the International Labour Organization - which is a U.N. agency - and the Organisation for Economic Co-operation and Development.

“There is a large set of norms out there, from the U.N. Global Compact to ILO or OECD-type treaties,” he said.

Being one of the biggest shareholders in almost every firm in which it invests, the fund has unique access and even if it cannot change every offender, its decisions can affect entire sectors.

“We all hope to make the world a little better but that’s not our goal; in the course of our work we might contribute to setting norms and others may follow, but our responsibility is to the Norwegian people,” he said.

Andresen said his personal clout could also improve the council’s effectiveness, speeding up the work.

“I am not a politician, I‘m not a public official, I simply want to get things done,” he said. “I don’t have any prestige in this, I simply want to do what we should be doing and I‘m quite direct. We have a licence to move forward with speed.” (Reporting by Balazs Koranyi; editing by David Stamp)

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