Norway fund shuns tobacco companies

By Andrew Ward in Stockholm

Published: January 19 2010 19:44 | Last updated: January 19 2010 19:44

Norway has dropped 17 tobacco companies, including Philip Morris and British American Tobacco, from its sovereign wealth fund, adding to a growing list of stocks blacklisted by Europe’s biggest equity investor.

Imperial Tobacco, Altria, Reynolds American and Japan Tobacco were among others barred from the $455bn fund – which owns more than 1 per cent of all global stocks – after the Norwegian finance ministry ruled that the companies were in breach of the fund’s ethical guidelines.

The tobacco companies join a list of about 50 stocks excluded from the Norwegian fund on ethical grounds, ranging from arms manufacturers, such as Boeing and BAE Systems, to companies accused of environmental and labour rights violations, including Rio Tinto and Wal-Mart.

Norway has sought to make its sovereign wealth fund a role model for socially responsible investment since introducing ethical guidelines in 2003. Tobacco companies initially escaped exclusion but Sigbjørn Johnsen, finance minister, on Tuesday said it was time for them to be removed.

“It is important that the ethical guidelines reflect at all times what can be considered to be commonly held values of the owners of the fund,” he said.

The fund, in which Norway invests its oil wealth for future generations, is the world’s second-largest sovereign wealth fund after that of the United Arab Emirates.

According to Reuters calculations, the fund’s holdings in the 17 excluded tobacco companies were worth NKr14.6bn ($2.6bn) at the end of 2008. Its stakes included 1.3 per cent of British American Tobacco, 0.5 per cent of Philip Morris International and 1.3 per cent of Imperial Tobacco.

The finance ministry said all stocks had been sold in advance of Tuesday’s announcement. It added that other companies connected with the industry could be excluded in future.

The fund has a Council of Ethics that recommends stocks for removal, with the final decision made by the finance ministry.

Norway stirred controversy last September by excluding Elbit Systems, an Israeli company that supplies the surveillance system for the “separation barrier” under construction by Israel in the West Bank.

Other blacklisted companies include Honeywell and Northrop Grumman for their role in making nuclear weapons and EADS, Lockheed Martin andRaytheon for production of cluster munitions.