What Do the Norwegians Do?

I asked: what do the Norwegians do with their sovereign wealth (link)?

A commentator offers an answer. Here’s a fascinating story form the NYT that I missed last spring (link):

Norway has amassed a fortune of more than $300 billion over the last decade, thanks to its profits from oil exports. Yet few countries are more ambivalent about their vast wealth than this modest, socially conscious society of less than five million people.

So rather than managing their monstrous nest egg simply for the best returns, the reluctant billionaires of Norway are using the money to advance an ambitious ethical code they established in 2004 for their oil reserve, known as the Government Pension Fund. …

Public pension funds on both sides of the Atlantic commonly avoid investing in certain companies on social or ethical grounds. But it is rare for a sovereign state to make such judgments, and rarer still for one to do it in the pointed, public way that Norway has … Twelve of the 21 companies on Norway’s excluded list are American. …

“We’ve managed to combine professional fund management with an ethical approach,” said Kristin Halvorsen, the Norwegian finance minister. “We see them as two sides of the same coin.”

Socially responsible investing, she said, has not hindered the fund’s performance. In 2006, it generated a return of 7.9 percent, a shade higher than the government’s target. …

Norwegians have long viewed themselves more as humanitarians than oil barons. The country played a central role in pushing a United Nations treaty banning land mines, and it was host for the Oslo peace talks between Israel and the Palestinians.

Still, as the world’s No. 3 oil exporter after Saudi Arabia and Russia, Norway’s wealth has become harder to ignore.

The government began salting away its oil proceeds in a special reserve in 1996. Known until last year as the Petroleum Fund, it was renamed the Pension Fund, which is supposed to make Norwegians aware that the fund’s purpose is to provide for future generations.

With the spike in oil prices, it has become the biggest public fund in Europe. At the rate it is growing, experts say it will be worth $800 billion to $900 billion in a decade. That translates into $180,000 for every man, woman and child in Norway.

“Inevitably, Norwegians feel bad about having all this money,” said Gro Nystuen, a human rights lawyer who is chairman of an ethics council that screens investments. “Our job is to make the Norwegian people feel less guilty.”

Even before the ethics code was adopted, Norway placed restrictions on where the fund could put its money. To avoid overheating the economy, it can invest only in companies outside Norway. Half its holdings are in Europe; about 30 percent are in the United States.

“We basically own a slice of the world,” said Henrik Syse, who runs the fund’s corporate governance department at the Norwegian central bank.

A moral philosopher by training, Mr. Syse said he drew on the likes of Aristotle, Kant, and Mill in his efforts to influence the behavior of companies. While he tries to redeem companies, the ethics council decides which ones are destined to fall short.

The grounds for exclusion fall into five categories: serious or systematic human rights violations; serious violations of individual rights in war and conflict; severe environmental damage; gross corruption; and other serious violations of fundamental ethical norms.

The decision to ban makers of land mines and cluster bombs was widely accepted here, though when Norway added companies involved in nuclear weapons production, a few critics noted that the country had willingly taken shelter under NATO’s nuclear umbrella. The fund sold off nearly $1 billion worth of stock in all these companies. …

Branching out from companies to countries, Norway recently said that it would not invest in Myanmar, formerly known as Burma, which has jailed the democracy activist Aung San Suu Kyi.

Critics see a slippery slope. There is already a move to add tobacco companies to the excluded list. If Myanmar is banned, than why not also shun Saudi Arabia, with its record on women’s rights? Then again, Norway’s state oil company, Statoil, is active in Islamic countries.

“There is a double standard,” said Christian Tybring-Gjedde, a member of the opposition Progress Party.

Ms. Halvorsen acknowledged the dilemma. Blacklisting companies that worsen climate change, she said, would put Norway in an awkward spot as its national fortune rests on fossil fuels. …

Why are so many of the companies American? “It is your dominance of the world economy,” Ms. Halvorsen said, smiling and shrugging her shoulders.