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A view of the city of Oslo as seen from the roof of the Oslo Opera House in Oslo, Norway, Thursday, Oct. 21, 2021.
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Norway’s $1.7 trillion sovereign wealth fund may have to divest from companies that violate a new, stricter interpretation of ethics standards for companies that aid Israel’s operations in the occupied Palestinian territories.
The ethics board of the world’s largest sovereign wealth fund sent a letter to the finance ministry on Aug. 30, seen by Reuters, outlining a newly expanded definition of unethical corporate behavior. The change has not been previously reported.
The letter did not specify the number of companies or the names of the companies whose shares might be sold, but indicated that it would be a small number, if the central bank's board of directors, which has the final say, follows the recommendations made by the council.
The company said it has already identified one company to divest from under the new definition.
“The Ethics Board believes that the ethical guidelines provide a basis for excluding a few more companies from the Government Pension Fund Global in addition to those already excluded,” the supervisory board wrote in a statement, using the official name for Norway’s sovereign wealth fund.
The fund has been a global leader in environmental, social and governance (ESG) investing. It owns 1.5% of the world’s listed stocks across 8,800 companies, and its size carries impact.
Since the beginning War in Gaza In October, the fund’s ethics watchdog investigated whether more companies fell outside its permissible investment guidelines, and the scope of exceptions “is expected to increase somewhat” under the new policy, the letter said.
Among the companies that the regulatory body may consider are: RTX Company, General Electric and General DynamicsAccording to NGOs, they manufacture weapons used by Israel in Gaza, where it controls parts of the Strip. Military attack The Israeli war on Gaza has killed nearly 41,000 Palestinians. The companies did not immediately respond to requests for comment.
According to the fund's data, the value of its investments in Israel as of June 30 amounted to 16 billion kroner ($1.41 billion), in 77 companies, including companies operating in real estate, banking, energy and communications. These investments represent 0.1% of the fund's total investments.
Regarding Gaza, the council focuses on arms producers in countries that are not parties to the Arms Trade Treaty, a 2014 agreement on the trade in conventional arms. “This concerns primarily American companies,” the letter said, without naming any.
“There are very few relevant companies left in the fund,” she added, partly because many U.S. arms manufacturers are already banned from producing nuclear weapons or cluster munitions.
The Fund’s ethical rules are set by the Norwegian Parliament. The Fund’s updated ethical definition comes in part as a result of an opinion issued by the International Court of Justice in July on Israel’s occupation of Palestinian territory.
The letter said the court took positions on “several new facts and legal issues” that would make it possible for “companies with less direct connection to the standards violations” to be in breach of the ethics rules, without providing examples.
The new definition of moral violations is based on the International Court of Justice’s ruling that “the occupation itself, Israel’s settlement policy and the way in which Israel uses the natural resources in the territories are contrary to international law,” according to the letter.
The fund had previously divested from nine companies operating in the occupied West Bank under its previous policy. The companies’ operations include building roads and homes in Israeli settlements in East Jerusalem and the West Bank and providing surveillance systems for the Israeli wall around the West Bank.
The ethics board makes its recommendations to the board of the central bank that manages the fund. The bank often follows the regulator's advice to exclude companies, but not always.
The bank may also notify the company of a change in its behavior or request the fund management to communicate with it directly. The companies identified for divestment are not named until after the fund sells their shares.
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