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Oil Fund Strongly Increased in Tobacco, Decreased in Arms

The Oil Fund’s investment in tobacco has increased by more than 40%, to US$ 1 billion, Norwatch found on examining the fund’s new portfolio. The investment in arms has, for its part, decreased strongly: the Oil Fund has withdrawn from nine of the largest arms producers in the world.
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The Oil Fund’s investment in tobacco has increased by more than 40%, to US$ 1 billion, Norwatch found on examining the fund’s new portfolio. The investment in arms has, for its part, decreased strongly: the Oil Fund has withdrawn from nine of the largest arms producers in the world.

(First published in Norwegian 28 Feb 2006)

By Pia Gaarder

Norwatch’s examination of the new portfolio of the Norwegian Government Pension Fund - Global (also called the Oil Fund), which was disclosed today, shows that the fund has bought heavily into tobacco. This year the investment has reached a new record, with US$ 1,02 billion in 12 of the largest tobacco producers. That is 40.9% more than last year, when Norwatch showed that the tobacco investments reached a top of US$ 719 million.

The investment has now increased further and creates an even greater disparity between the government’s anti-smoking policy, on the one hand, and its investment policy, on the other. “This constitutes double standards”, Anne Lise Ryel, Secretary General of the Norwegian Cancer Society, told Norwatch.

“We are opposed to Norway investing in these companies. We have been loud and clear about this, both in contact with the authorities and officially”, Ryel continued.

“Norway has a very high profile nationally and internationally in the fight against smoking, since it kills millions of people every year. It therefore constitutes double standards when we invest in the tobacco industry”.

Oil Fund's investments in tobacco are:
Altria Group: US$ 415,7 billion
British American Tobacco: US$ 158,5 million
Japan Tobacco: 70,1 million
Imperial Tobacco: 106,3 million
Gallaher Group: 45 million
Loew’s Corp: 17,3 million
Reynolds American: 15,8 million
Fortune Brands: 38,8 million
Altadis: 107,5 million
Souza Cruz: 2,4 million
KT&G Corp: 0,7 million
Swedish Match: 42,9 million

(Numbers collected from The Norwegian Pension Fund - Global's  annual report from 2005, published February 28th 2006. The investments are per 31 Dec 2005)

Decrease in Arms
The ethical guidelines have, however, substantially decreased the Oil Fund’s investment portfolio in arms. Whereas the Oil Fund in 2005 increased its investment in the world’s 10 largest arms producers by almost 40%, from US$ 352 million to US$ 512 billion, the development is now the reverse. The Oil Fund’s investment in the world’s largest arms producers has now decreased by all of 88.3%, from NOK 3.075 to NOK 359 million.

By getting rid of producers of cluster arms and nuclear arms, the Oil Fund has in fact gotten out of nine of the ten largest weapons companies in the world. The investment in the weapons companies’ top ten list is now limited to the controversial company Halliburton. Here the Oil Fund has increased its investment from US$ 33,1 million last year to US$ 57,4 million. Halliburton has, moreover, made a lightning career in arms and has in a few years jumped from being the world’s 61st largest arms producer in 2003 to being the 10th largest today.

Still Ill-Reputed
The Oil Fund, which as of 31 December 2005 amounted to US$ 223,7 billion, is still invested in a long series of ill-reputed companies. But the shares in the French oil company Total, notorious for its involvement in the junta’s Burma, has decreased from US$ 909 million to US$ 287 million. The Ethical Council did not recommend that the Ministry of Finance get out of Total, but the Bank of Norway did at least, in the course of 2005, sell off many of its shares in the company.

The investments in the controversial Aracruz Celulose, which is in part owned by Erling Lorentzen, the Norwegian King’s brother-in-law, have decreased somewhat, from US$ 7,2 million to US$ 5,5 million.

The Oil Fund still invests in a series of international ill-reputed companies that are blacklisted by other fund managers, such as Kommunal Landspensjonskasse (KLP). To cite a few of them, the Oil Fund still invests in Wal-Mart, which requires pregnancy testing before employment and undermines trade unions; the chemicals giant BASF, which has smuggled and sold non-approved insecticides; and Chevron (previously ChevronTexaco), which let Nigerian security forces utilise Chevron’s vessels and helicopters during attacks on civilians, and which for many years has dumped large amounts of poisonous refuse in Ecuador.

The investments in Wal-Mart have sunk minimally from US$ 268 million to 255 million.
The BASF investments have increased from US$ 175,9 million to 287,8 million.
The investments in Chevron have increased substantially, from US$ 239,8 million to 879,5 million.

Arms Companies That Are Out of the Oil Fund
The following arms companies have been dropped from the Oil Fund because they produce components for cluster bombs, nuclear weapons, or land mines. To the left of each entry is the ranking given in the Defence News' list of the world’s largest arms producers. In parentheses is the value of shares and bonds sold.

Totally, US$ 735,6 million in investments were withdrawn last year; the share value of these was US$ 516 million, and the bond value was US$ 190 million.

Nr. 1 - Lockheed Martin Corp, USA (US$ 44,2 mill. in shares, 13,3 mill i bonds)
Nr. 2 - Boeing Co, USA (57,2 mill. in shares, 18,4 mill. in bonds)
Nr. 3 - Northrop Grumman Corp, USA (38,9 mill. in shares, 28,9 mill. in bonds)
Nr. 4 - BAE Systems Plc, GB (64,1 mill. in shares, 7,7 mill. in bonds)
Nr. 5 - Raytheon Co, USA (29,5 mill. in shares, 25 mill. in bonds)
Nr. 6 - General Dynamics Corporation, USA (26,6 mill. in shares, 19,1 mill. in bonds)
Nr. 7 - EADS - European Aeronautic Defence and Space Company Co, Frankrike (96,4 mill in shares)
Nr. 8 - Honeywell International Inc, USA (32,7 mill. in shares, 25,7 mill. in bonds)
Nr. 9 - Thales SA, Frankrike (9,3 mill. in shares)

Nr. 11 - Finmeccanica Sp.A., Italia (15,3 mill. in shares, 20 mill. in bonds)
Nr. 12 - United Technologies Corp, USA (110,4 mill. in shares, 31,8 mill. in bonds)
Nr. 13 - L3 Communications Holdings Inc, USA (8,3 mill. in shares)
Nr. 20 - Alliant Techsystems Inc, USA (2,4 mill. in shares)

Safran SA, former Snecma and SAGEM, Frankrike (10,9 mill. in shares)

Other Companies Withdrawn
EADS Finance BV (financial company, subsidiary of the cluster bomb producer EADS Co.)
Kerr-McGee, USA (oil extraction in Morocco-occupied Western Sahara, US$ 35,5 million in shares, US$ 18,4 million in bonds)
Singapore Technologies Engineering (land mine production in conflict with international law, withdrawn from in 2002)

The Oil Fund formally changed name at the turn of the year, from the Norwegian Petroleum Fund to the Norwegian Government Pension Fund - Global. Little has changed: the Oil Fund remains a fund whose profits from oil extraction in the North Sea, is invested in about 3000 international stock exchange-listed companies, plus in bonds issued by states or companies.

At the end of 2005 the fund’s market value was US$ 223,7 billion. Its value increased, according to the Bank of Norway, by US$ 61,2 billion during the year. US$ 35,2 billion of this was due to injection of new capital from the Ministry of Finance. The returns, measured in international currency, was 20,3  billion.