Back in late August, the news that Norges Bank Investment Management (NBIM) had divested its stake in US machinery giant Caterpillar certainly piqued our interest, but it was the subsequent comments by US Senator Lindsey Graham that really grabbed our attention.
NBIM’s independent Council on Ethics reported that it had “no doubt” that Cat products are being used in a manner which violates international humanitarian law, and that the company is not implementing any measures to prevent this.
NBIM then clearly stated that it found the Council’s recommendations “sufficiently substantiated”, and so went ahead with the divestment, and by extension ensured the fund remained aligned to its criteria.
Here at Ethical Screening, we firmly believe that ethics are individual to the investors that institutions serve, that investors have a right to choose how they invest based on these ethics, and that supporting institutions have a right (and a responsibility) to do this on behalf of their clients.
In the case of Norway’s sovereign wealth fund, the country’s Parliament decided that the fund should not invest in companies that cause or contribute to serious violations of ethical norms. Assuming the fund’s ultimate clients are the Norwegian people, and that their elected officials have decided this on their behalf, then there is an incredibly strong mandate for the fund’s managers to act in a way that ensures this criterion is not breached.
As such, we applaud NBIM’s managers for their commitment not only to the funds ethical criteria, but the will of those who they manage the fund’s assets for - the Norwegian people.
Which leads nicely to US Senator Graham’s comments.
Given his warning that Norway risked facing new trade tariffs on its exports due to this divestment, or that visa travel restrictions could be imposed on managers of the sovereign wealth fund, it’s hard to see the Senator’s comments as anything other than an attempt to influence NBIM’s decision making.
If the Norwegian parliament had decided that the fund should suddenly divest from American companies for no clear or justifiable reason, then the Senator’s apparent outrage would be more understandable, but this is hardly so. As outlined above, its decision was based on an independent assessment of Cat’s activities through a lens of international law.
As such, there are grounds to argue that Graham was hoping to change NBIM’s ethical criteria based on what the US, or at least he himself, believed to be suitable. It would be the same if any third party, acting for their own benefit or motives, attempted to use threats and blackmail to change the ethical criteria applied by an investment manager on behalf of its clients.
Coming back to the issue of corporate links to Israel and its actions in the Occupied Palestinian Territories (and beyond), the team at Ethical Screening are engaging with this at numerous levels. We are working not only with our clients, but also with internationally recognised groups and organisations to help shape approaches to what is an incredibly complex issue.