Daily Management Review

Norwegian Oil Fund makes a blacklist of companies


03/09/2017


The Norwegian Oil Fund intends to send down several companies due to high corruption risks. Organizations with large amounts of carbon dioxide emissions and other non-core assets have already been blacklisted. Thus, the fund intends to achieve economic efficiency and keep only companies with oil assets in accordance with the previously adopted development strategy.



The State Pension Fund of Norway ("Oil Fund"), the largest national wealth fund in the world with assets of about $ 900 billion, sees a corruption component in companies from a wrong sector. The situation is also aggravated by the fact that the fund now includes a number of companies that do not allow conducting transactions on the market, thereby depriving the fund of additional earnings. The fund hints that the accumulated capital is used to cover Norway’s budget deficit, and this gradually leads to a deterioration in the fund’s economic performance.

Head of the Central Bank of Norway Øystein Olsen  saidthat in the next 10 years the "Oil Fund" could be cut by half if the state retains or increases amount of borrowing from it. Such a situation, Olsen explained, can develop if the global recession causes a decline in world oil prices while reducing the income from the fund's investments.

The "Oil Fund" of Norway itself says that the organisation has to spend resources on non-core assets and cover expenses with hydrocarbon gas emissions with income from Norway’s oil industry. The organization came to the conclusion that such a position is extremely wrong, and asked to reconsider this issue.

Johan Andresen, Chairman of the fund’s independent council for ethics, said that this year the organization will be freed from non-core assets and will put an end to this issue. The fund recommends eliminating companies with a high volume of carbon dioxide emissions, as well as companies in the defense, telecommunications sectors and arms manufacturers. The Fund has already sent recommendations to the Central Bank of Norway, which will take a decision soon.

"All companies with non-core assets have a number of factors that limit activities of the fund, in particular, there are several elements of risk: large contracts, government acting as counterparties, lack of transparency and a large number of intermediaries. All this creates a high risk of corruption", Andresen said. 

Thus, the Norwegian Wealth Fund decided to block all suspicious companies and to avoid corruption risks.

Andresen also added that he has already started working and is preparing the first recommendations. 

source: reuters.com






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