while Bush bankrupts the entire FUTURE of the United States of America
Selling oil is easier than investing ethically, Norway finds
By Mark Landler The New York Times
Thursday, May 3, 2007
For a people whose deep national pride is bestowing the Nobel Peace Prize, Norwegians
are developing a reputation for throwing sharp elbows.
And the country is doing it in an unexpected way: by pulling investments out of
Wal-Mart and other companies for what it claims are ethical failings.
Norway has amassed a fortune in excess of $300 billion over the past decade, thanks
to a geyser of profits from its oil exports. Yet few countries are more ambivalent
about their vast wealth than this modest, socially conscious Scandinavian society
of fewer than five million people.
So rather than managing this monstrous nest egg simply for the best returns, the
reluctant billionaires of Norway are using the fund to advance an ambitious ethical
code that they established in 2004 for their oil reserve, known as the Government
Pension Fund.
Norway's investment choices have grown more controversial in the past nine months
over the exclusion of Wal-Mart, the American retailer whose big-box stores do not
exist in this pristine country.
Public pension funds on both sides of the Atlantic commonly avoid investing in certain
companies on social or ethical grounds. But it is extremely rare for a sovereign
state to make such judgments, and rarer still for one to do it in the pointed, public
way that Norway has.
Among the first companies to run afoul of Norway's standards were makers of
cluster bombs and nuclear weapons or related components - a list that includes
Boeing, Lockheed Martin and Northrop Grumman.
Then last June, Norway added Wal-Mart Stores to its blacklist, alleging that the
retailer was guilty of tolerating child-labor violations by its suppliers in the
developing world and obstructing unions at home. The fund sold off more than $400
million worth of Wal-Mart shares.
That drew a sharp protest from the American ambassador to Norway, Benson Whitney,
who accused the government of a sloppy screening process that unfairly singled out
American companies.
"An accusation of bad ethics is not an abstract thing," Whitney said.
"They're alleging serious misconduct. It is essentially a national judgment
of the ethics of these companies."
Whitney, a Minnesota venture capitalist with ties to the Bush administration, said
Norway takes aim at companies arbitrarily, based on unreliable third-party reports
and, in the case of Wal-Mart, on a cottage industry of Wal-Mart bashers.
A spokeswoman for Wal-Mart, Beth Keck, disputed Norway's allegations, saying
they were based on inaccurate and outdated information. After initially disregarding
Norway's allegations, Wal-Mart late last year sent two senior executives to
plead its case with Norwegian officials, and the two sides continue discussions.
Twelve of the 21 companies on Norway's excluded list are American. But the problem
is not just that the blacklist has a red-white-and-blue tinge, according to Whitney.
Norway, he said, has not created a consistent policy for separating the good from
the bad.
"I'm not sure the Norway government understands the power of being one
of the largest investors in the world," he said.
Norwegian officials reject that criticism, saying they have devised a policy that
compares well with those of major funds in Europe and the United States that practice
so-called socially responsible investing.
"We've managed to combine professional fund management with an ethical
approach," said Kristin Halverson, the Norwegian finance minister. "We
see them as two sides of the same coin."
Socially responsible investing, she said, had not hindered the fund's performance.
In 2006, it generated a return of 7.9 percent, a shade higher than the government's
target.
Halverson is an unlikely choice to oversee one of the world's richest funds.
She is the leader of the Socialist Left party, which draws support from students,
teachers, and left-leaning intellectuals.
Since entering the government in late 2005, she has made it clear she would like
to expand Norway's social agenda. Among the next companies in her sights: those
that contribute to global warming.
"In a global economy, ownership of companies is the most important way to have
influence," Halverson said.
Norwegians have long viewed themselves more as humanitarians than oil barons. The
country played a central role in pushing a United Nations treaty banning land mines,
and it was host for the Oslo peace talks between Israel and the Palestinians.
Still, as the world's No. 3 oil exporter after Saudi Arabia and Russia, Norway's
wealth has become harder to ignore.
The government began salting away its oil proceeds in a special reserve in 1996.
Known until last year as the Petroleum Fund, it was renamed the Pension Fund, which
is supposed to make Norwegians aware that the fund's purpose to provide for
future generations.
With the spike in oil prices, it has become the biggest public fund in Europe. At
the rate it is growing, experts say, it will be worth between $800 billion and $900
billion in a decade. That translates into $180,000 for every man, woman and child
in Norway.
"Inevitably, Norwegians feel bad about having all this money," said Gro
Nystuen, a human rights lawyer who chairs an ethics council that screens investments.
"Our job is to make the Norwegian people feel less guilty."
Even before the ethics code was adopted, Norway placed restrictions on where the
fund could put its money. To avoid overheating the economy, it can only invest in
companies outside Norway. Half of its shareholdings are in Europe; about 30 percent
are in the United States.
"We basically own a slice of the world," said Henrik Syse, who runs the
fund's corporate governance department at the Norwegian central bank.
A moral philosopher by training, Syse said he draws on the likes of Aristotle, Immanuel
Kant, and John Stuart Mill in his efforts to influence the behavior of companies.
While he tries to redeem companies, the ethics council decides which one are destined
to fall short.
The grounds for exclusion fall into five categories: serious or systematic human
rights violations; serious violations of individual rights in war and conflict;
severe environmental damage; gross corruption; and other serious violations of fundamental
ethical norms.
> The decision to ban makers of land mines and cluster bombs was widely
accepted here, though when Norway added companies involved in nuclear-weapons production,
a few critics noted that the country had willingly taken shelter under NATO's
nuclear umbrella. The fund sold off nearly $1 billion worth of stock in these companies.
Representatives of Boeing and Lockheed Martin declined to comment on Norway's
decision.
Among other pariahs is the big American mining company Freeport McMoRan of the
United States, which Norway accuses of severe environmental damage at its copper
and gold mine in Indonesia.
Freeport responded to the allegations with a 25-page, point-by-point rebuttal.
Norway's report, it said, "is utterly false and bears no resemblance to
our company or its operations."
Branching out from companies to countries, Norway recently said it would not invest
in Myanmar, formerly known as Burma, which has jailed the pro-democracy figure Aung
San Suu Kyi.
Critics see a slippery slope. There is already a move to add tobacco companies to
the excluded list. If Myanmar is banned, than why not also shun Saudi Arabia, with
its record on women's rights? Then again, Norway's state oil company, Statoil,
is active in several Islamic countries.
"There is a double standard," said Christian Tybring-Gjedde, a member
of the opposition Progress Party.
Halverson acknowledged the dilemma. Blacklisting companies that worsen climate change,
she said, would put Norway in an awkward spot as its national fortune rests on fossil
fuels.
Wal-Mart was the first company singled out for human rights violations. In its report,
Norway alleged evidence of child labor and dismal working conditions at factories
owned by Wal-Mart suppliers in Bangladesh, China and elsewhere.
The report cites news media articles, legal complaints, and findings from labor
organizations, much of which Wal-Mart claims are inaccurate or out-of-date. Yet
when Norway submitted its report to Wal-Mart last March, the company ignored it.
That was a mistake, Ambassador Whitney said, and Wal-Mart is not disputing him.
"It has been a learning experience for us," said Keck, the Wal-Mart spokeswoman.
Now that Wal-Mart is in touch with the government, Norway said it would be open
to reviewing its status. Keck declined to say whether Wal-Mart is seeking to be
reinstated.
For Whitney, Wal-Mart illustrates a weakness in Norway's screening process:
with few resources and thousands of companies to cover, it will choose those from
countries with the freer access to information. Many of these happen to be American.
While Whitney stopped short of saying there was a political motive behind the selection,
he said, "the process invites the accusation because of its lack of rigor."
While Norway and the United States have had warm relations, Americans here point
out that in its manifesto, the Socialist Left Party describes the United States
as "the greatest threat to world peace."
Halverson waves away suggestions of anti-Americanism. "Of course it is easier
to investigate American companies," she said. "But Wal-Mart had the chance
to answer."
Why are so many of the companies American? "It is your dominance of the world
economy," Halverson said, smiling and shrugging her shoulders.
Walter Gibbs contributed reporting.
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