The council recommended the fund to exclude Wal-Mart because it found that the firm engages in acts of serious and systematic violations of human and labour rights. Freeport, on the other hand, was excluded because it was found to be causing serious environmental damage through its business operations in Indonesia and West Papua.

The decision to withdraw investments in the two companies was made in late March and the disposal of stocks and bonds in the companies was completed in late May. As of 31 December 2005 the Government Pension Fund – Global had invested approximately NKr2.5bn (€318m) in Wal-Mart and NKr116m (€14m) in Freeport.

The Norwegian minister of finance Kristin Halvorsen said that the exclusions reflect the refusal of the ministry to contribute to serious, systematic or gross violations of ethical norms through its investments.

Before excluding Wal-Mart and Freeport the council had tried to engage in a dialogue with both firms. In September 2005 it wrote to Wal-Mart and asked the firm to comment on the allegations that it employs children, that working conditions at many of its suppliers are hazardous to health and that workers are pressured into working overtime without compensation. It also noted that the company systematically discriminates against women in pay and that all attempts to unionise by the company’s employees have been stopped.

The assessment encompassed the firm’s operations in the US and Canada, and at its suppliers in Nicaragua, El Salvador, Honduras, Lesotho, Kenya, Uganda, Namibia, Malawi, Madagascar, Swaziland, Bangladesh, China and Indonesia.

As Wal-Mart did not respond to the ministry it decided to follow the recommendations of the council and excluded Wal-Mart from the fund’s investments.

“What makes this case special is the sum total of ethical norm violations, both in the company’s own business operations and in the supplier chain. It appears to be a systematic and planned practice on the part of the company to cross the bounds of what are accepted norms for the work environment,” the council states.

In the case of Freeport, the council raised concerns that the firm is inflicting extensive and serious damage on the environment through its waste management practices. Freeport operates the world’s largest copper mine in New Guinea in Indonesia. It uses a natural river system for disposing of nearly 230,000 tonnes of tailings each day, which releases large quantities of sediments and heavy metals such as copper, cadmium and mercury in the water. The tailings disposal has inflicted serious damage on the river system and parts of the nearby rainforest and has notable negative consequences for the health of the indigenous peoples residing in the area.

The council invited Freeport to comment on the its assessment in December 2005. The company replied in January 2006, refuting all allegations. It also gave no indication that it intends to alter the way it manages waste in the future.

The council concluded that the fund runs an unacceptable risk of contributing to severe environmental damage by investing in Freeport and the firm was excluded from the Government Pension Fund’s investments.

The decision to exclude Wal-Mart and Freeport come after the seven companies accused of producing nuclear weapons had been left out of the fund. In January 2006 the ministry excluded BAE Systems, Boeing, Finmeccanica, Honeywell International, Northrop Grumman, Safran and United Technologies. The fund’s investments in these companies totalled almost NKr3.3bn (€420m).

In April, the council also decided that European Aeronautic Defence and Space Company (Eads), which it had excluded from the portfolio in late 2005, would still not be included back in the fund’s investment universe. Although the company is no longer involved in the production of cluster munitions, it was found to be involved in the production of nuclear weapons.

“Exercise of ownership rights is the instrument best suited to influencing companies in a desired direction,” says Ms Halvorsen.
 RC

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