(Bloomberg) -- The ethics council for Norway’s $1.7 trillion sovereign wealth fund said it may recommend widening the list of companies to exclude over their links with Israel, which is fighting a war in Gaza and operating militarily in the West Bank.
Over the years, nine companies have been excluded from the fund for activities in the West Bank, ranging from the construction of roads to the leasing of buildings. An exclusion means the fund, Norges Bank Investment Management, sheds its holdings and refrains from buying more.
This year, the ethics council has advised the fund to remove one more company and could recommend excluding “a few more,” according to an Aug. 30 letter sent to the Finance Ministry, which oversees the fund. The fund is not obligated to comply.
NBIM holds shares in about 8,700 companies worldwide. It owned stock in 77 Israeli companies as of the end of June, valued at about $1.5 billion and corresponding to 0.1% of its total investments.
The questions over NBIM’s holdings have come to the fore after an attack on Israel by Hamas in October led Israel to launch a war on the militant organization centering on Gaza. The struggle dates back more than a century, including in the West Bank, where Israeli security forces have a fixed presence.
Hamas has been designated a terrorist organization by the US and European Union. The Norwegian government officially recognized Palestinian statehood in May, leading to Israel pulling its ambassador from the Nordic nation.
In a previous letter, the Finance Ministry called on the ethics council to provide more detail on the framework it uses to decide whether companies have violated international law in the occupied territories. The council in its 2023 report placed special emphasis on the work it is doing regarding companies associated with conflict zones —Ukraine, the Occupied Palestinian Territories and Myanmar.
In its letter last week, the ethics council referred to a July opinion from the the International Court of Justice as a reason for potentially excluding more companies. The court called on Israel to end its “unlawful” occupation of large parts of the Palestinian territory and held Israel responsible for compensating Palestinians who had been evicted from their homes.
The ICJ ruling “indicates that the size and scope of exclusions of companies with connections to the West Bank can be expected to gradually increase,” Svein Richard Brandtzaeg, council chairman and former chief executive officer of Norsk Hydro ASA, wrote in the letter.
While the fund is not required to follow the advice of the ethics council, it generally does so. Companies previously cut include Aircraft manufacturer Boeing Co. and British defense company BAE Systems Plc, both for making components associated with nuclear weapons. Adani Ports & Special Economic Zone Ltd. was cut earlier this year for transparency concerns related to a port sale in Myanmar.
--With assistance from Galit Altstein and Ethan Bronner.
(Adds background on Hamas, ethics council from sixth paragraph)
©2024 Bloomberg L.P.
