Norway Central Bank to Decide Oil Fund Exclusions

OSLO--Norway's government said Thursday that from Jan. 1 the central bank will take over deciding which companies to exclude from the portfolio of the country's sovereign-wealth fund and that it would no longer have the final word.

"The changes in the governing documents are a result of a long-term effort to strengthen the work on responsible investment management in the fund," Finance Minister Siv Jensen said.

Ms. Jensen said the government wanted "better interaction" between the $845 billion fund's use of ownership power and the exclusion mechanism. The government has previously said it wants to avoid speculation that the fund is used for political means.

The fund's mandate bans certain types of assets deemed to be unethical, including companies that produce nuclear weapons, cluster bombs and tobacco, or contribute to human rights violations, such as child labor.

An expert group proposed this month that the fund should also exclude companies that contribute to climate change, but no decision has been made by Parliament.

The fund's list of excluded companies includes Lockheed Martin Corp. (LMT), Raytheon Co. (RTN), EADS Co., Boeing Co. (BA), Poongsan Corp. (103140.SE), Philip Morris International Inc. (PM), Rio Tinto PLC (RIO) and Wal-Mart Stores Inc. (WMT).

The criteria for exclusion will remain unchanged and changes to the fund's exclusion mandate will still be decided by Parliament, Norway's finance ministry said.

The wealth fund's ethically based exclusions are based on thorough assessments by an ethics council, which will continue to give advice which companies to exclude. However, the advice and final word on exclusions will now be in the hands of Norges Bank's executive board, rather than the finance ministry.

Norway's sovereign-wealth fund--the world's biggest--was set up in the 1990s to act as the main investment vehicle for the country's oil revenues. It has expanded more than tenfold in the past decade and is expected to be worth 7.533 trillion Norwegian kroner ($1.02 trillion) by 2020. The fund is managed by Norges Bank Investment Management, an arm of the central bank.

Write to Kjetil Malkenes Hovland at [e-mail]

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