World's biggest fund turned off extractives on ethical grounds

Tuesday, 4 March, 2014

Related to our piece on Vedanta yesterday, where among other things we brought you news of the Norwegian government Pension Fund’s exclusion of Vedanta subsidiary Sesa Sterlite on ethical grounds, we wanted to bring your attention to this piece over on and the related links below. It’s further evidence of the serious guns being brought to bear on ethical issues as they relate to investment, and particular to extractives.

Norway’s review goes beyond Sesa Sterlite - quite a long way beyond, in fact. They’re reviewing all investment in extractives, mainly due to environmental concerns. According to Reuters, GPFG has set up a "set up a panel to examine whether the fund should quit oil, gas and coal firms [completely] over their environmental impact."

Norway, a wealthy country very high in your average standard of living chart essentially because of rich north sea oil deposits (and a knack for the canny use thereof) has an $840 billion sovereign fund called the Government Pension Fund Global (GPFG), which is the world’s biggest equity investor and which owns 1% of all global stocks. It can afford to prioritise doing the right thing and - credit where it's due - quite transparently that is what it's doing. GPFG has reduced gold and coal investments and, according to Reuters, "will review the entire mining sector this year".

Partly as a consequence of these divestments the fund has increased bond investments, and was a net seller of shares in 2013 for the first time - that year being its second-best year ever. 

CEO Yngva Slyngstad was reported by Reuters as clarifying that Norway was not "selling out of the sector”: "We are concentrating our investments on the companies that we think are continuing this activity in a more sustainable way," he said.

In a linked development Bloomberg also reports that as well as reducing its interest in the extractives sector, GPFG has switched emphasis from certain European stocks to emerging markets in Asia and South America.