The ethics council that decides which companies Norway’s $800 billion sovereign wealth fund should avoid could lose independence following a report by a government-appointed commission.
The commission’s report also sought more research on the performance of ethical investments.
At this year's Sohn Investment Conference, Dan Sundheim, the founder and CIO of D1 Capital Partners, spoke with John Collison, the co-founder of Stripe. Q1 2021 hedge fund letters, conferences and more D1 manages $20 billion. Of this, $10 billion is invested in fast-growing private businesses such as Stripe. Stripe is currently valued at around Read More
World’s largest sovereign wealth fund
Government Pension Fund of Norway (GPF) is the world’s largest sovereign wealth fund. The $800 billion fund is currently managed by Norges Bank Investment Management (NBIM), but is owned by the Norwegian state. The globally popular fund owns around 1.25% of the world’s stocks.
NBIM owns about 1% of all U.S. stocks and 7% of all European stocks.
The sovereign wealth fund is run by the central bank and its decisions are followed closely by international borrowers. The fund is not allowed to invest in some industries – tobacco, nuclear arms, anti-personnel landmines and cluster bombs. The fund also can’t invest in companies involved in serious or systematic human rights violation.
The government-appointed commission’s report suggested that the proposed reform could improve efficiency and enhance the decision-making process.
Panel to be part of central bank
The government-appointed commission recommended the $800 billion wealth fund’s ethics panel should be part of the central bank. It believes that if the panel becomes part of the central bank, it would not require the approval of the ministry, thereby hastening the exclusion process.
However, non-governmental organizations have criticized the commission’s proposal citing a strong and independent player is required to perform the screening of a company. They claim such a move would undermine the oil fund’s credibility when it comes to ethical guidelines.
Currently, the five-strong council on ethics decides which companies should be excluded, subject to approval from the ministry of finance. The approval process can often go on for several months.
The wealth fund invests in about 7,500 companies and has excluded about 60 firms so far, including Lockheed Martin Corporation (NYSE:LMT), The Boeing Company (NYSE:BA) and Philip Morris International Inc. (NYSE:PM). During 2006, the fund exited from Wal-Mart Stores, Inc. (NYSE:WMT) for alleged breachs of human rights and labor rights which led other funds including Sweden’s four national pension funds to withdraw.
Earlier this year, the fund made its first investment in U.S. real estate by purchasing stakes in five office properties in the U.S.