Big business can and should make ethical investments
Monday, 21 July 2008

Norway's Sovereign Wealth Fund has proven that big money can be invested in ethical ways. Others should follow suit

Guardian
Gwladys Fouché

Many people think ethical investments are a worthy but inconsequential sideline away from the business of making big money – an indulgence for do-gooders. But the example of the second largest sovereign wealth fund (SWF) in the world, after Abu Dhabi's, may give them food for thought. Norway's Government Pension Fund, worth a dizzying £203bn, frequently flexes its ethical muscles.
 
The fund saves up nearly all the income from its oil and gas resources from the North Sea – the Nordic country is the world's fifth largest oil exporter and second biggest gas exporter to Europe. It invests nearly all the money outside its borders, to avoid overheating the domestic economy, taking only 4% of the fund's revenue each year to balance the annual budget. And when it invests its cash, it makes sure it's done ethically.
 
In 2006, the fund disinvested from US retail giant Wal-Mart because its labour policies, such as blocking employees' attempts to form unions or pressurising staff to work overtime without compensation, amounted to "serious/systematic violations of human rights and labour rights".

The year before, it kicked out Britain's largest weapon manufacturer, BAE Systems, citing its involvement in the production of nuclear weapons. The fund does not invest in companies producing "especially inhumane" military equipment, such as nuclear, chemical and biological weapons, as well as anti-personnel landmines or cluster bombs. Neither does it invest in industries that harm the environment on a large scale. In total, about 25 firms have been kicked out.
 
Earlier this year, it even went one step further by publishing its shareholder voting records for every company it invests in. It has taken a stand against excessive boardroom pay, global warming, labour standards and freedom of access to the internet. The fund is now reviewing its ethical guidelines and may go even further.
 
There have been criticisms. For instance, it is investing in countries that are violating human rights, such as Saudi Arabia. Finance minister
Kristin Halvorsen, who is in charge of the fund, says she would blacklist countries only if that became official Norwegian foreign policy but is open to the question being debated.
 
Despite these criticisms, overall the fund has been hailed as a model for other SWFs to follow, with European Commission president José Manuel Barroso calling it a "gold standard".
 
Norway's example shows that big money can be invested in ethical ways. How about other financial actors following suit?

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