In a decisive move emphasizing ethical investment principles, Norges Bank, Norway’s central bank, announced on Wednesday the exclusion of three companies from its Government Pension Fund Global. The companies in question are India’s Adani Ports and Special Economic Zone (APSEZ), United States-based L3Harris Technologies, and China’s Weichai Power. The exclusions come after serious ethical considerations and recommendations by the Council on Ethics.
Adani Ports and Serious Human Rights Concerns
Adani Ports, part of billionaire Gautam Adani’s vast conglomerate, has been excluded due to concerns about its potential involvement in severe human rights violations. Norges Bank raised issues about the company’s possible contribution to “serious violations of individuals’ rights in situations of war or conflict.” Adani Ports, India’s largest private port operator with a 24% share of the nation’s port capacity, had been under observation since March 2022. The Council on Ethics recommended the exclusion in a report dated November 21, 2023.
The decision highlights the fund’s rigorous scrutiny over companies that might be involved in conflicts, directly or indirectly contributing to human suffering. Adani Ports’ extensive operations in regions of conflict have raised ethical red flags, prompting Norges Bank to take this significant step.
Exclusion of L3Harris Technologies and Weichai Power
L3Harris Technologies, a major US defense contractor, was excluded due to its involvement in the development and production of components for nuclear weapons. The production and proliferation of nuclear arms contravene several international arms control treaties and ethical norms adhered to by the Government Pension Fund Global.
Weichai Power, a leading manufacturer of transport equipment in China, was excluded over concerns that its activities might support the sale of weapons to states involved in armed conflicts. Such actions potentially violate international rules and contribute to ongoing violence and instability.
Ethical Guidelines and the Council on Ethics
Norges Bank’s decision follows a recommendation from the Council on Ethics, which was established to evaluate whether the investments of the Government Pension Fund Global comply with ethical guidelines. These guidelines encompass a broad spectrum of concerns, including human rights, environmental sustainability, and anti-corruption measures.
The Council on Ethics conducts thorough investigations and observations before making recommendations. The exclusion of Adani Ports, L3Harris Technologies, and Weichai Power underscores the council’s commitment to ensuring that the fund’s investments do not contribute to unethical practices or human rights abuses.
The Government Pension Fund Global: A Brief Overview
The Government Pension Fund Global, often referred to as Norway’s oil fund, was established to manage the country’s substantial oil revenues. Originating from the discovery of oil in the North Sea in 1969, the fund was formally established in 1990 with the first deposits made in 1996. Its primary purpose is to ensure financial stability and long-term savings for future generations, shielding the Norwegian economy from the volatility of oil prices.
Today, the fund is one of the world’s largest sovereign wealth funds, with holdings in approximately 9,000 companies worldwide. It exclusively invests abroad to protect the domestic economy and currently owns nearly 1.5% of all shares in the world’s listed companies. The fund’s ethical investment strategy is designed to promote sustainability and responsible business practices globally.
Implications of the Exclusions
The exclusion of these three companies from the Government Pension Fund Global is a powerful message about the importance of ethical investing. For Adani Ports, L3Harris Technologies, and Weichai Power, the exclusions could have significant financial and reputational impacts. These companies will need to address the ethical concerns raised if they wish to restore investor confidence and potentially regain access to investments from one of the world’s largest sovereign wealth funds.
For other companies within the fund’s portfolio, this move serves as a stark reminder of the rigorous ethical standards they must meet. The fund’s actions reinforce the importance of adhering to international human rights standards, avoiding involvement in armed conflicts, and maintaining transparent and responsible business practices.
Norges Bank’s decision to exclude Adani Ports, L3Harris Technologies, and Weichai Power from its Government Pension Fund Global underscores the central bank’s unwavering commitment to ethical investment principles. This move not only aligns with global ethical standards but also sets a precedent for other sovereign wealth funds and institutional investors worldwide. By holding companies accountable for their involvement in unethical practices, the Government Pension Fund Global continues to pave the way for a more responsible and sustainable investment landscape.
