Norway's $1.7 Trillion Wealth Fund: Ethical Overhaul Could Lead to Divestment from Companies Supporting Israeli Operations in Gaza
By Gwladys Fouche
OSLO (Multibagger) - Norway's Sovereign Wealth Fund, valued at a staggering $1.7 trillion, is contemplating divestment from companies that violate newly stringent ethical standards, particularly those aiding Israel's military activities in the occupied Palestinian territories.
The Council on Ethics for the world's largest sovereign wealth fund has proposed a broader interpretation of unethical corporate behavior, according to an Aug. 30 letter to the finance ministry, viewed by Multibagger. This new interpretation has not been previously disclosed.
The letter did not specify the number of companies or name them but indicated that a small number of stocks might be sold if the central bank's board, which holds the final decision-making power, follows the council's recommendations. One company has already been earmarked for disinvestment under these new guidelines.
"The Council on Ethics believes the ethical guidelines justify excluding a few more companies from the Government Pension Fund Global in addition to those already excluded," the watchdog stated, referring to Norway's sovereign wealth fund by its formal name.
Leading the ESG Movement
Norway's wealth fund has been an international pioneer in the environmental, social, and governance (ESG) investment sector. Holding 1.5% of the world's listed shares across 8,800 companies, the fund's decisions carry substantial weight in global markets.
Since the onset of the Gaza conflict in October, the fund's ethics watchdog has been scrutinizing more companies for potential violations of its investment guidelines. The scope of exclusions is "expected to increase somewhat" under the new policy, the letter revealed.
Companies Under Scrutiny
Among the companies potentially facing exclusion are RTX Corp, General Electric (NYSE: GE), and General Dynamics (NYSE: GD). According to NGOs, these corporations manufacture weapons used by Israel in Gaza, where Israeli military actions have resulted in nearly 41,000 Palestinian casualties. The companies have yet to respond to requests for comment.
As of June 30, the fund held investments worth 16 billion crowns ($1.41 billion) in Israel, spanning 77 companies in sectors such as real estate, banking, energy, and telecommunications. These investments represent 0.1% of the fund's overall portfolio.
New Legal Opinion and Ethical Focus
The Council's renewed focus on Gaza centers on weapon producers in countries not part of the Arms Trade Treaty, a 2014 agreement governing conventional weapons trade. "This mainly concerns American companies," the letter noted, without naming specific firms.
Few relevant companies remain in the fund, partly because many U.S. defense manufacturers were already excluded for producing nuclear weapons or cluster munitions.
The fund's ethical guidelines are established by Norway's parliament. The updated ethical definition by the watchdog is partly influenced by a July opinion from the International Court of Justice regarding Israel's occupation of Palestinian territories. The court addressed "several new facts and legal issues" that could render "companies with a less direct connection to violations of norms" in breach of the ethics rules, the letter explained.
The new ethical breaches definition is based on the ICJ's finding that "the occupation itself, Israel's settlement policy, and the way Israel uses natural resources in the areas are in conflict with international law," the letter stated.
Previously, the fund divested from nine companies operating in the occupied West Bank under its prior policy. These companies' operations included building roads and homes in Israeli settlements in East Jerusalem and the West Bank and providing surveillance systems for an Israeli wall around the West Bank.
Decision-Making Process
The Council on Ethics submits recommendations to the central bank's board, which manages the fund. While the bank often follows the council's advice to exclude firms, it does not always do so. The bank can also warn a company to alter its behavior or direct the fund's management to engage with it directly. Companies designated for disinvestment are not named until the fund has sold the shares.
Breaking It Down: What This Means for You
In simple terms, Norway's $1.7 trillion wealth fund is tightening its ethical standards. This means they might sell stocks of companies that help Israel's military actions in Gaza, especially if these companies are producing weapons. This could affect big American companies like General Electric and General Dynamics.
Why should you care? If you invest in these companies, you might see changes in their stock prices. Moreover, it highlights the growing importance of ethical investing, which could influence other big funds and your future investment choices. Ethical investing is not just a trend but a significant shift in how money is managed globally.