Norway's oil fund divests from Korea's Posco and Daewoo

Channels: Equity, Investment, Policy, Stranded Assets

Companies: Posco, Daewoo International, Government Pension Fund Global, Norges Bank, Genting, IJM, Rio Tinto, Norilsk Nickel, Freeport McMoRan, Vedanta Resources, Barrick Gold

Norway's sovereign wealth fund – the largest in the world – is to exclude leading Korean companies Posco and Daewoo International from its investment portfolio because of their involvement in palm oil plantations in Indonesia.

At the end of 2014, the $870 billion Government Pension Fund Global had a $198 million stake in Posco and a $9 million holding in Daewoo.

"There is an unacceptable risk that Daewoo, and thus also its parent company Posco, may be responsible for severe environmental damage in connection with the conversion of tropical forest into oil palm plantations in Indonesia," said the fund's Council of Ethics in a letter to Norges Bank, which manages the fund.

Two Malaysian conglomerates, Genting and IJM, are also being excluded from the portfolio for the same reasons.

Posco is one of the world's largest steel companies but also owns 60% of Daewoo International, Korea's largest trading company. Daewoo, in turn, owns 85% of PT Bio Inti Agrindo (PT BIA), an Indonesian plantation company. The latter is currently converting tropical forest into palm oil plantations in West Papua, a region rich in biodiversity, according to the Council of Ethics.

The Council said it had been in contact with Daewoo several times last year and had sought information about the impacts on biodiversity of its forestry activities. But "the information Daewoo has provided to the Council provides few answers," it said.

"In the Council's view, Daewoo is doing little to preserve biodiversity and important ecological values in the concession area," it added. Neither Daewoo nor PT BIA are members of the Roundtable on Sustainable Palm Oil, the Council noted.

Norges Bank said it has therefore concluded that further engagement with the company "is not appropriate".

The four companies join a list of 60 that have already been excluded from the oil fund's investment portfolio because of their involvement in weapons manufacturing, tobacco production, human rights violations or environmental damage (see table). Major mining companies feature prominently on the list of those excluded on environmental grounds. They include: Rio Tinto, Norilsk Nickel, Freeport McMoRan, Vedanta Resources and Barrick Gold.

A June vote by the Norwegian parliament also committed the fund to divest from mining and power companies that base 30% or more of their activities on coal, or gain more than 30% of their revenues from coal.

Graham Cooper

Excluded companies (as of 17 August) 

Production of weapons that through their normal use may violate fundamental humanitarian principles

Production of nuclear arms

  • Alliant Techsystems Inc
  • Lockheed Martin Corp
  • The Babcock & Wilcox Co.
  • Jacobs Engineering Group Inc.
  • Serco Group Plc.
  • Aerojet Rocketdyne Holdings, Inc.
  • Safran SA.
  • Northrop Grumman Corp.
  • Honeywell International Inc.
  • Airbus Group Finance B.V.
  • Airbus Group N.V.
  • Boeing Co.

Anti-personnel land mines

  • Singapore Technologies Engineering

Production of cluster munitions

  • Textron Inc.
  • Hanwha Corporation
  • Poongsan Corporation
  • Raytheon Co.
  • General Dynamics corporation
Production of tobacco
  • Schweitzer-Mauduit International Inc.
  • Huabao International Holdings Limited
  • Grupo Carso SAB de CV
  • Shanghai Industrial Holdings Ltd.
  • Alliance One International Inc.
  • Altria Group Inc.
  • British American Tobacco BHD
  • British American Tobacco Plc.
  • Gudang Garam tbk pt.
  • Imperial Tobacco Group Plc.
  • ITC Ltd.
  • Japan Tobacco Inc.
  • KT&G Corp
  • Lorillard Inc.
  • Philip Morris International Inc.
  • Philip Morris Cr AS.
  • Reynolds American Inc.
  • Souza Cruz SA
  • Swedish Match AB
  • Universal Corp VA
  • Vector Group Ltd.
Actions or omissions that constitute an unacceptable risk of the Fund contributing to:
 

Severe environmental damages

  • IJM Corp Bhd
  • Genting Bhd
  • POSCO
  • Daewoo International Corp
  • Sesa Sterlite (Madras Aluminium Company and Sterlite Industries Ltd. (both excluded 31 October 2007) are merged into Sesa Sterlite)
  • WTK Holdings Berhad
  • Ta Ann Holdings Berhad
  • Zijin Mining Group
  • Volcan Compaña Minera
  • Lingui Development Berhad Ltd.
  • Samling Global Ltd.
  • Norilsk Nickel
  • Barrick Gold Corp
  • Rio Tinto Plc.
  • Rio Tinto Ltd.
  • Vedanta Resources Plc.
  • Freeport McMoRan Copper & Gold Inc.
 

Serious or systematic human rights violations

  • Zuari Agro Chemicals Ltd.
  • Wal-Mart Stores Inc.
  • Wal-Mart de Mexico SA de CV
 
Other particularly serious violations of fundamental ethical norms
  • Potash Corporation of Saskatchewan
  • Elbit Systems Ltd.
 
Serious violations of the rights of individuals in situations of war or conflict
  • Africa Israel Investments
  • Danya Cebus
  • Shikun & Binui Ltd.