Wartime is posing new challenges for the world’s largest sovereign wealth fund.
A new recommendation could open the door for Norway’s €2 trillion wealth fund to invest in major Western defence groups that are currently banned from its portfolio because of their involvement in nuclear arms production.
A government-appointed commission proposed the change as part of a review of the fund’s ethical rules on Thursday.
Under its current ethical guidelines, the fund excludes 14 companies because they develop or make nuclear weapons or their components, including industry giants Airbus, BAE Systems, Boeing, Lockheed Martin and Safran.
The Norwegian government ordered a review of the guidelines in November last year.
The commission was chaired by former central bank governor Svein Gjedrem.
Under the proposed exemption, the fund could invest in nuclear arms makers based in a nuclear-weapon state recognised under the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) that is also a NATO ally of Norway.
“This means that several British, French and American arms manufacturers will be brought back into the fund,” Gjedrem said as he presented the 434-page document.
Other ethical exclusion criteria – such as the manufacture of biological and chemical arms, landmines and cluster bombs, as well as those covering coal, tobacco and cannabis – would be retained, the commission said.
The report was submitted to Finance Minister Jens Stoltenberg, a former NATO secretary general.
Stoltenberg noted “the paradox” that “the Norwegian fund cannot invest in companies that could be crucial for Norway’s security”, at a time when Russia is increasingly threatening to use nuclear weapons, and China is boosting its own arsenal.
The commission also recommended changes to the Council on Ethics, an independent body responsible for making recommendations to Norway’s central bank, which manages the fund.
The council would remain responsible for assessing the risk that companies could seriously violate the fund’s ethical standards, but it would no longer be able to directly recommend excluding them from the portfolio, a power already suspended pending the review.
The report’s recommendations will undergo public consultation until 15 January before the government presents its assessment to parliament next spring.
Some political parties, particularly those on the left, have already criticised the report, with one Green official calling it “utterly senseless”.
The fund invests in more than 7,000 companies around the globe and owns around 1.5% of the world’s listed shares.