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Oil fund fends off more criticism

Norway’s large and powerful sovereign wealth fund known as the “Oil Fund” was the target of more tough criticism on Monday, this time from the international Organisation for Economic Cooperation and Development (OECD). It claims the fund managers, led by Yngve Slyngstad, haven’t been cooperative themselves, and may have been party to human rights violations in the process.

Yngve Slyngstad, chief executive of Norges Bank Investment Management, shared his thoughts on the finance crisis and brought along his own coffee. PHOTO: Views and News
Yngve Slyngstad, chief executive of Norges Bank Investment Management, thinks he and his staff are open and cooperative about how it manages its oil fund investments, but others now including the OECD disagree. PHOTO:

The oil fund, officially known as the Norwegian Government Pension Fund Global and fueled by the country’s oil revenues, is managed by a unit of Norway’s central bank that Slyngstad heads, Norges Bank Investment Management (NBIM). It is charged with investing and building up Norway’s already formidable oil wealth for future generations, and also is supposed to use its ownership clout to “promote good corporate governance and high social and environmental standards” at the companies in its investment portfolio.

The ethics council that oversees those investments is currently evaluating whether to pull out of Exxon Mobil, for example. It has also caught criticism for that, but now the NBIM itself is under criticism for investing too passively in South Korean steel company POSCO, which also is widely believed to have violated human rights.

‘Failed to use its influence’
The POSCO complaint, according to NBIM itself, concerns POSCO’s alleged violations of the OECD Guidelines for Multinational Enterprises in connection with POSCO’s plans to develop iron mining, steel production and related infrastructure in the Indian state of Odisha. POSCO’s plans will force the resettlement of thousands of local residents and they’ve been protesting long and loudly. Local residents affected in India also claim that NBIM should have used its influence (as a shareholder in POSCO) to prevent or mitigate the damage.

The OECD has now criticized the oil fund not only for violating the international organization’s rules for responsible business but also for failing to comply with requests for information from its OECD control organ in Norway, its so-called “National Contact Point” (NCP).

It’s led by respected Norwegian law professor Hans Petter Graver, who says NBIM hasn’t cooperated with it and hasn’t been open or forthcoming. Graver also claims NBIM, in its management of the oil fund, lacks a strategy for identifying and handling possible violations of human rights in the companies in which it invests.

‘Refused to cooperate’
In a press release issued early Monday morning, the Norwegian NCP concluded that NBIM “has refused to cooperate” and “refused to give answers to our written questions” on the grounds that it’s a minority shareholder in POSCO and therefore not subject to OECD guidelines.

Graver disagrees, and claims support from the the United Nations High Commissioner for Human Rights. “It is especially regrettable that the governmental manager of the Norwegian pension fund global, and one of the biggest investors in the world, does not respect the guidelines which Norway has signed (with the OECD),” Graver said.

He called upon the oil fund’s managers “to cooperate with the OECD” by responding to the NCP’s questions and accept the NCP offer to facilitate dialogue and/or mediation. “Be transparent about how NBIM is a responsible investor in the POSCO case,” Graver urged.

His NCP also urged NBIM to expand its “human rights due diligence” to address “the whole range of human rights relevant to its investment, and not only to child labour.” The NCP further called on NBIM to identify human rights risks, work with other investors to increase leverage and publicize its strategy for human rights due diligence.

“Disclosure will make NBIM less vulnerable to criticism that NBIM addresses human rights risk randomly,” Graver said.

Fund managers think they’re open enough
NBIM officials including oil fund leader Yngve Slyngstad claimed to be surprised by the harsh criticism from the OECD and its local NCP.

“We consider ourselves quite open,” Slyngstad told Norwegian Broadcasting (NRK). “We try to be open about everything we do, and we try to share everything that’s not sensitive business information or information we have received confidentially with the public in Norway.”

Slyngstad also claimed that NBIM officials answer questions they receive, had “two good meetings” with the NCP and view their cooperation as “very good.”

“They have said we didn’t answer questions in writing, but this is first and foremost an organ that has a verbal process which we have followed to the degree we can,” Slyngstad told NRK.

Pressured to disclose how shares are voted
He and the oil fund have also been criticized for a lack of openness, meanwhile, about how fund managers vote the fund’s shares at annual shareholder meetings. Now Slyngstad promises more disclosure about voting practices.

In what Slyngstad calls “a matter of principle,” for example, the fund generally opposes the same person holding the titles of both chairman of the board and chief executive, since the board usually hires the chief executive. The fund recently voted in favour of a proposal by some shareholders of JP Morgan Chase against the reelection of JP Morgan’s Jamie Dimon as chairman, in an effort to bring in an independent chairman.

“We voted for the proposal on principle, not to be part of a shareholder revolt,” Slyngstad told newspaper Dagens Næringsliv (DN) over the weekend. He still caught criticism, however, for initially failing to reveal how the fund voted. He said the lack of information was more a result of the time it would take than any desire for secrecy, since the fund votes annually at more than 10,000 annual shareholder meetings.

Views and News from Norway/Nina Berglund

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