Photo: Ministry of Finance/Rune Kongsro
By Pia A. Gaarder
First published in English 21 April 2009
Special expectations were attached to this year’s report to the Norwegian Parliament with regard to the administration of the Norwegian Government Pension Fund – Global because of the evaluation and revision of the ethical guidelines for the Fund.
“There has been great interest in the report to the Parliament. Fifty different bodies entitled to comment have made suggestions and contributed to improvements in the ethical guidelines,” Kristin Halvorsen said at a press conference on 3 April.
Among the important new measures that the government is preparing are the following:
- Exclusion of tobacco-producing companies from the portfolio.
- Creation of a watch list as a new measure towards companies that are in the grey zone in terms of exclusion.
- Strengthening of the active ownership effort, among other things, asking Norges Bank to formulate more expectation documents to be submitted to the companies. Today such a document has been compiled for child labour. Norges Bank will now be asked to develop such expectation documents for the companies’ environmental and climate strategies and for the companies’ transparency and reporting on payment flows. The Ministry of Finance believes that clear expectations in this area can contribute to counteract the use of tax havens to conceal illegal acts.
- New demands for transparency and reporting linked to the exercise of ownership.
- Preparation of a procedure for how a company that is excluded can be reincluded in the portofolio.
The new ethical guidinglines must be passed by the Parliament. It is not very likely that the government’s suggestion will not be passed more or less in its present form.
Tobacco Investments Out
The first direct consequence of the new ethical guiding lines is that all tobacco producers must be excluded from the Pension Fund.
Norwatch has for many years drawn attention to the Pension Fund’s huge investments in the tobacco industry. The last review Norwatch made of the portfolio in March this year shows that the tobacco investments in the 10 largest tobacco companies during a year have increased by all of 24.6 %, from NOK 11.4 to 14.2 billion.
“There is no healthy way to use tobacco. There is growing international recognition that a large share of the world’s health problems is due to tobacco. And today special attention is being directed at how tobacco affects the population of developing countries,” Halvorsen said at the press conference.
Previously the Socialist Left Party (SV) was almost the only party in Parliament which wanted tobacco excluded from the Pension Fund. A committee headed by Law Professor Hans Petter Graver in 2003/2004 drew up the ethical guidelines for the Pension fund. The committee was divided on the question of the exclusion of tobacco. The disagreement was great, and the exclusion of tobacco did not become part of the ethical guidelines at that time.
The question has also been brought up in the Parliament directly, but SV’s suggestion to exclude the tobacco industry was in 2004 defeated by 81 against 21 votes. At that time only SV, the Centre Party and the Coast Party supported the proposition to exclude the tobacco industry in its entirety.
But 5 years later the finance minister from SV is able to write a report to the Parliament that entails that the tobacco industry is excluded from the investment portfolio.
New Attitude to Tobacco
A negative screening of entire product groups is considered a very strong instrument and has previously been utilised towards producers of special kinds of weapons (landmines, cluster munitions and nuclear weapons). The report to the Parliament says that this instrument should be limited to special cases in which one can use as a basis that there exists a clear common set of values in the Norwegian population.
Several things have happened since 2004:
“There has been a development during the period since the Graver committee suggested today’s ethical guidelines – internationally through a special convention dedicated to tobacco control (came into force in February 2005) and nationally through tightening of the smoking legislation in 2004, which must be considered to constitute such a clear common set of values related to negative screening of tobacco products,” the report to the Parliament states.
The Ministry of Finance has also considered questions about the possibility of excluding from the Fund’s investment universe other services that are injurious to one’s health or are socially unfavourable, including alcohol, but there is not the same degree of norm development nationally or internationally to give a corresponding clear foundation. Furthermore, tobacco is a product that that stands out because it can lead to serious health injury when used in accordance with the premises for normal use.
In the Ministry’s consideration, it is therefore production of tobacco that should form the basis for negative screening. Consequently, the sale of tobacco will not be stricken by the criterion, the report says.
About the Report to the Parliament
The report to the Parliament about the administration of the Government Pension Fund comprises both the Government Pension Fund – Global (the Oil Fund) and the smaller Government Pension Fund – Norway (previously the National Insurance Scheme Fund/Folketrygdfondet).
The report to the Parliament about the administration of the Government Pension Fund is being published for the third time. Earlier the review of the administration of the Oil Fund a part of the government budget.
Table: The Government Pension Fund’s shares in tobacco
| Companies ||2005*||2006*||2007*||2008* |
|Philip Morris International***||3.335,1|
|British American Tobacco||991,3||1.380,3||2.517,1||4.777,8|
|Fortune Brands||242,8|| 133,2 ||198,1||196,9|
|KT&G Corp||4,7||1,4 ||22,4||114,9|
|Gallaher Group||281,3||313,0||0||0 |
|Total - group 1||6.292,3||8.073,5||11.401,6||14.209,5|
|Other tobacco shares***|
|Compagnie Financiere Richemont SA||790,9 |
|Philip Morris CR||19,1 |
|British American Tobacco Malaysia BhD||65,8 |
|TOTAL - ALL||15.377,4|
*The figures are all in millions of norwegian kroner. They derive from the Annual Report for the Government Pension Fund – Global for 2008, 2007 and 2006, published by Norges Bank’s Investment Management and the annual report for the Government Petroleum Fund for 2005. The annual reports show the investments as they were on 31 December. The portfolio for 2008 was published on 11 March 2009.
** Spanish Altadis was aquired by Imperial Tobacco at the beginning of 2008.
*** Philip Morris International was separateed as a distinct company from Altria Group on 28 March 2008 and the shares distributed among Altrias shereholders. This spin-off is said to clear the international tobacco business from the legal and regulatory constraints facing its domestic counterpart, Philip Morris USA, that is stilled controled by Altria. (Altria Group came into existence in 2003 as the new parent company for Kraft Foods, Philip Morris International, Philip Morris USA and Philip Morris Capital Corporation.)
***Further tobacco companies not included in the comparison from previous years. It may be some other tobacco shares in the Pension Fund which are not included in this list.