Norway’s largest pension fund has divested $15 million from Gulf companies on concerns they may contribute to human rights violations, and decided to exclude the oil producer Saudi Aramco because of climate risks.
KLP, which oversees $70 billion in pension funds, has blacklisted a dozen companies listed in Saudi Arabia, Qatar, the United Arab Emirates and Kuwait from its investment portfolio. The divestments mostly reflect an “unacceptable” risk of contributing to human rights abuses, it said, with Aramco targeted separately for its negative impact on the environment.
ESG, short for environmental, social and governance investing, has been one of the biggest buzzwords of the year. But Norwegian investors have been following through with concrete actions.
Norway’s sovereign wealth fund, the world’s largest, last year dropped the Thai energy conglomerate PTT from its portfolio, saying its activities in Myanmar could help fund the military junta’s abuses.
The firms excluded this week by KLP included companies in the real estate sector, where it says migrant workers from Africa and Asia have faced discrimination and human rights violations.
The fund also targeted the telecommunications sector, where it cited the development of artificial intelligence as reinforcing the risk of surveillance and censorship in the region.
“Gulf states remain characterised by authoritarian systems of government that restrict freedom of expression and political rights, including of critics and human rights activists,” said Kiran Aziz, the fund’s head of responsible investment, in a statement.
KLP manages pensions for the public sector, including Norwegian municipalities, and describes itself as a responsible investor that’s willing to divest from companies for environmental, social and governance reasons.
In recent years, it has targeted Adani Green Energy Ltd on concerns the Indian company might have inadvertently helped finance polluting activities via its stake; US-based firms overseeing refugee centres linked to human right violations; and companies tied to Israeli settlements in the West Bank.
Aziz said KLP decided to exclude Aramco primarily because the oil and gas producer’s energy transition plan failed to meet expectations.
The pension fund said it had found engaging with companies in the Gulf States to be fruitful, but added that it was difficult for shareholders to influence Aramco as it is mostly state-owned.
KLP said the $15-million divestment amount would have been roughly $27 million if its investments more closely matched the index weightings of the stocks.