Norway's sovereign wealth fund – the largest in the world – is to exclude leading Korean companies Posco and Daewoo International from its investment portfolio because of their involvement in palm oil plantations in Indonesia.
At the end of 2014, the $870 billion Government Pension Fund Global had a $198 million stake in Posco and a $9 million holding in Daewoo.
"There is an unacceptable risk that Daewoo, and thus also its parent company Posco, may be responsible for severe environmental damage in connection with the conversion of tropical forest into oil palm plantations in Indonesia," said the fund's Council of Ethics in a letter to Norges Bank, which manages the fund.
Two Malaysian conglomerates, Genting and IJM, are also being excluded from the portfolio for the same reasons.
Posco is one of the world's largest steel companies but also owns 60% of Daewoo International, Korea's largest trading company. Daewoo, in turn, owns 85% of PT Bio Inti Agrindo (PT BIA), an Indonesian plantation company. The latter is currently converting tropical forest into palm oil plantations in West Papua, a region rich in biodiversity, according to the Council of Ethics.
The Council said it had been in contact with Daewoo several times last year and had sought information about the impacts on biodiversity of its forestry activities. But "the information Daewoo has provided to the Council provides few answers," it said.
"In the Council's view, Daewoo is doing little to preserve biodiversity and important ecological values in the concession area," it added. Neither Daewoo nor PT BIA are members of the Roundtable on Sustainable Palm Oil, the Council noted.
Norges Bank said it has therefore concluded that further engagement with the company "is not appropriate".
The four companies join a list of 60 that have already been excluded from the oil fund's investment portfolio because of their involvement in weapons manufacturing, tobacco production, human rights violations or environmental damage (see table). Major mining companies feature prominently on the list of those excluded on environmental grounds. They include: Rio Tinto, Norilsk Nickel, Freeport McMoRan, Vedanta Resources and Barrick Gold.
A June vote by the Norwegian parliament also committed the fund to divest from mining and power companies that base 30% or more of their activities on coal, or gain more than 30% of their revenues from coal.
Graham Cooper