Norway oil fund sells Asian shares for palm oil

Norway's gigantic sovereign wealth fund announced on Monday that it was divesting from four large Asian companies over the environmental damage their palm oil activities have on tropical forests.

Norway oil fund sells Asian shares for palm oil
A hillside on Sumatra where rainforest has been cleared for palm oil. Photo: vincentraal/Flickr
The world's largest public investment fund, managing 7.15 trillion kroner (785 billion euros, $872 billion), said its decision to exclude four groups — including South Korean group Daewoo International — from its portfolio was
based on “an assessment of the risk of severe environmental damage” from their conversion of tropical forests to cultivate palm oil.
Daewoo, South Korean steelmaker Posco and Malaysian groups Genting and IJM were targeted in the divestment decision by Norway's central bank, which manages the wealth fund that owns around 1.3 percent of all stocks on global equity markets, with stakes in about 9,000 companies.
The fund manages its investments according to strict ethical guidelines that have previously led it to exclude around 60 companies from its holdings, including Airbus, Boeing, Safran, Philip Morris and Wal-Mart.
Under the guidelines, it must avoid investments in groups accused of serious violations of human rights, child labour or serious environmental damage, as well as manufacturers of “particularly inhumane” arms and tobacco firms.
The decisions by the fund — which draws investment money from Norway's huge oil revenues, a fact that hasn't escaped some detractors — are frequently replicated by other international investors concerned about ethical
perceptions of their holdings.
Palm oil — used primarily in the cosmetics, food, and bio-fuel sectors — is a controversial industry, with campaigns mounted by environmental groups and consumers.
Daewoo fell afoul of the fund's managers for its 85-percent stake in an Indonesian company accused of clearing large swathes of the country's tropical forest for palm oil cultivation.
At the end of 2014 the fund owned 0.91 percent of Posco worth $198 million at the end of 2014, and 0.28 percent of Daewoo valued at $9 million.
Its 0.4-percent stake in Genting was worth around $41 million, and its 1.6-percent position in IJM was worth $46 million.
Independently of the ethical guidelines, the fund has in recent years put increasing emphasis on environmental issues in its investments, noting that problems such as deforestation and water management can affect a company's financial viability. In early 2012, it pulled out of 23 palm oil producers, without naming them.
Indonesia and Malaysia together account for about 80 percent of global production, though the industry is growing rapidly in Africa.
In order to improve practices, palm oil producers, distributors and non-governmental organisations in 2004 created the Roundtable on Sustainable Palm Oil (RSPO), an association whose charter bars producers from clearing old-growth forests or other conservation sites for cultivation.
Neither Daewoo nor Posco are members of RSPO. Palm oil represents only a small fraction of Daewoo's and Posco's overall businesses.
“This is a sign that the fund takes the issue very seriously,” said Nils Hermann Ranum of campaign group Rainforest Foundation Norway.
Genting and IJM are RSPO members but have been accused of not respecting its guidelines and not being transparent enough.
“This shows that RSPO is archaic when it comes to environmental certification,” Ranum said. “If it still wants to be taken seriously, it needs to tighten up its regulations.”
Norway's pension fund is intended to pay for future generations in the welfare-state after the country's oil wells run dry.

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Norway oil fund loses 18 billion euros in first half of 2020

Norway's huge sovereign wealth fund, the world's biggest, lost 188 billion kroner (18 billion euros, $21 billion) in the first half of the year as the global economy reels from the Covid-19 pandemic, the central bank said Tuesday.

Norway oil fund loses 18 billion euros in first half of 2020
Unusually empty slopes and ski lifts in Hemsedal in April. Photo: AFP

The fund, in which the Norwegian state's oil revenues are invested, was hit by plummeting share prices, with stocks accounting for 69.6 percent of its investments.

Its share portfolio posted a negative return of 6.8 percent in the first six months of the year.

At the end of June, the fund was valued at 10.4 trillion kroner (989 billion euros), up from the 9.98 trillion kroner seen at the end of the first quarter.

“The year started with optimism, but the outlook of the equity market quickly turned when the coronavirus started to spread globally,” the fund's deputy chief executive, Trond Grande, said in a statement.

“However, the sharp stock market decline of the first quarter was limited by a massive monetary and financial policy response,” he added.

Real estate investments, which represent 2.8 percent of the portfolio, also posted a negative return, of 1.6 percent, while bond investments, which account for 27.6 percent of assets, posted a gain of 5.1 percent.

“Even though markets recovered well in the second quarter, we are still witnessing considerable uncertainty,” Grande said.

The fund is meanwhile still mired in controversy over the appointment of a new chief executive.

Nicolai Tangen, a billionaire who founded the AKO Capital hedge fund in London, is due to take over the fund on September 1st, replacing Yngve Slyngstad who is retiring.

But critics have complained about Tangen's possible conflicts of interest, as well as his use of tax havens.

The central bank has meanwhile been criticised for irregularities in the recruitment process.

As a result, some major political parties are opposed to Tangen's appointment, and it remains up in the air.

READ ALSO: Norway's oil fund loses 1.3 trillion kroner ($125bn) in coronavirus crash