March 1, 2020 / 6:41 PM / a month ago

Exclusive: Norway wealth fund could blacklist four major climate culprits

OSLO (Reuters) - Norway’s $1 trillion wealth fund will exclude four companies for their vast emissions of greenhouse gases, or at least put them on probation to force them to change, the chairman of its ethics watchdog told Reuters.

FILE PHOTO: A general view of the Norwegian central bank in Oslo, Norway March 6, 2018. REUTERS/Gwladys Fouche/File Photo

The fund’s ethics body is, separately, opening a new front, said Johan H. Andresen: investigating whether technology companies’ tools are being used for “improper surveillance”, with their makers held to account regardless of their intent.

The world’s largest sovereign wealth, which has massive market influence because it owns 1.5% of the world’s listed shares, operates under ethical guidelines set by parliament.

Andresen, chairman of the fund’s Council on Ethics, said it had recommended the fund divest shares in the four polluters, after probing the oil, steel and concrete industries. The four companies were “worst in class” compared with peers in the same sectors but also compared with other sectors, he said.

The Norwegian central bank, which manages the fund, should make announcements about the firms imminently, the 58-year-old added. Companies to be excluded are not named until the fund has sold the shares, to avoid the stock falling in value beforehand.

“All of them were recommendations to exclude because we felt it was needed: they were cases that stood out,” Andresen said in an interview ahead of the publication of the council’s annual report on Sunday.

The central bank typically follows the council’s recommendations to censure companies but sometimes, rather than immediately excluding them, it puts them on a watch list to give them a set period of time to come up with a plan to significantly change their behavior, or face exclusion.

CARBON, NUKES, TOBACCO

The fund is forbidden by parliament from investing in companies that produce nuclear weapons, landmines, or tobacco, or violate human rights, among other criteria.

Emissions became a criterion for exclusion in 2016. In 2017 the Council on Ethics recommended a handful of companies be excluded but, since then, work had been suspended while the central bank asked for clarification from the finance ministry about the interpretation of the criterion. This has now happened, enabling the council to proceed.

To avoid blacklisting, companies should have a plan showing how they intend to adapt to climate change, with specifics crucial, Andresen said.

“We will look at speed, time, capital spend dedicated,” he added. “We want to see if they are walking the walk.”

A fifth company will now be assessed by the central bank for possible exclusion for using too much coal in its activities, Andresen said.

1984: BIG BROTHER’S WATCHING YOU

The council is also investigating a new area for possible human rights violations - whether tech products are used for “improper surveillance”.

“We are not looking at intent but whether the products of companies are being used improperly,” he said. “Artificial intelligence can be used to find cancer but it can be used for other things ... We are looking for documentation as to whether companies know what their products are used for.”

Andresen, who also owns private investment vehicle Ferd, said he expected the fund to announce possible exclusion decisions in this area this year as the council had already concluded investigations in “several cases”.

“We are looking at the sharper end, where the norm violations are the most visible and where it is easier to establish the facts,” he added. “George Orwell’s 1984 is, to some extent, here. These are scary developments.”

FILE PHOTO: Johan H. Andresen, a Norwegian investor and the chair of the ethics watchdog for Norway's sovereign wealth fund, poses for a picture in front of the Norwegian central bank in Oslo, Norway March 6, 2018. Picture taken March 6, 2018. REUTERS/Gwladys Fouche

Andresen said he also expected a decision to be published this year about a company that causes severe environmental damage, as well as several companies in the textile industry for labor condition violations that breached human rights.

Some 65 companies have been excluded by the fund, on various grounds, on recommendations from the Council on Ethics. Another 68 companies have been excluded directly by the central bank based on their dependence on coal.

The fund, created from the proceeds of Norway’s oil industry, gradually sells shares in any company it wishes to drop. The main aim is to remove the ethical risk.

Reporting by Gwladys Fouche; Editing by Pravin Char

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