Norway fund blacklists FMC, Potash over ethics

Norway's state pension fund, one of the biggest sovereign wealth funds in the world, has blacklisted investment in US chemicals firm FMC Corporation and Canadian fertiliser maker Potash over ethics concerns, Oslo said on Tuesday.

"The companies' conduct represents particularly serious violations of fundamental ethical norms… The breaches result from the companies' purchases of phosphate from Western Sahara," the Norwegian finance ministry said in a statement.

Potash, which is the world's leading fertiliser maker, and FMC both buy phosphate from Moroccan company OCP, which extracts the mineral in Western Sahara, a disputed territory annexed by Morocco in 1975.

Quoting United Nations recommendations from 2002, the ministry pointed out that "mineral resources extraction in territories which are not self-governed is only acceptable if it benefits the local population of the territory."

The ministry stressed that the ethics council which advises Norway's government on investments by the country's so-called oil fund "takes the view that the interests of the local population are not served by OCP's operations."

The fund contains all state revenues from Norway's massive oil and gas industry and is worth about €430 billion ($576 billion).

The finance ministry said it had followed the ethics council's recommendation and ordered on September 30th the sale of all of the fund's holdings in the two companies, which at the end of 2010 amounted to 1.57 billion kroner ($272.6 million) worth of shares in Potash and 300 million kroner worth of shares in FMC.

"The share sales have now been completed," the ministry said on Tuesday.  

In a separate statement, the finance ministry also said it had placed French engineering group Alstom on its observation list "due to the risk of gross corruption in the company's operations."

The ministry said it had held off on deciding whether to blacklist Alstom since it was "currently the target of legal proceedings in many different countries, and that the outcomes of these proceedings are not yet clear."

It said the ethics council would observe Alstom over a four-year period, and the final decision on whether or not to block investments in the company would among other things "depend on the company's systems for handling corruption prevention."

"We will have a low tolerance for corruption instigated after the company was put on the observation list," Finance Minister Sigbjørn Johnsen said in the statement.

In a third statement, the ministry meanwhile said it decided to maintain investments in China's state-owned PetroChina, despite an ethics council recommendation to pull out of the company over the risk of human rights violations linked to pipeline construction in Burma.

The finance ministry concluded though that since PetroChina itself was not building the pipelines — they are being built by another subsidiary of its parent company China National Petroleum Corporation — "the link between PetroChina and the possible ethical violations is too weak to justify the exclusion" of the company from the fund's portfolio.

Norway's oil fund was created in the beginning of the 1990s to help finance the country's generous welfare state system once the wells run dry, and is invested in equities and bonds, as well as real estate.

More than 50 companies have already been blacklisted by the fund over ethics concerns, including Boeing, Wal-Mart, EADS and BAE Systems.

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