The world’s largest sovereign wealth fund should avoid Saudi stocks

The Norwegian welfare state relies in large part on the revenues from the oil and gas business. But the fund is not supposed to invest in such stocks.

Saudi Aramco oil field: The shares of the Saudi oil company should be taboo for Norway's sovereign wealth fund in the future.

NNorway’s $ 1.3 trillion sovereign wealth fund is said to avoid stakes in Saudi Arabian companies. These should not be included in the reference index that regulates the fund’s investments, as the Ministry of Finance announced in Oslo on Friday. Saudi stocks should therefore not be included due to risks in the areas of environmental, social and corporate governance, as the annual recommendation to parliament shows.

Norway’s sovereign wealth fund, which was founded in 1996 and is mainly fed by income from the oil and gas business, is the largest in the world. Its income secures the extensive Norwegian welfare state. The government also suggested that the fund get exposure to fewer companies. The number of holdings should be reduced by 25 to 30 percent to around 6600 – mainly through the separation of shares in smaller companies.

Most recently, the sovereign wealth fund held stakes in 9,200 companies and owned 1.5 percent of all shares listed on the stock exchange. The money is also invested in bonds and real estate. The current Norwegian government does not have its own majority in parliament. It must therefore win the support of the other parties so that its proposals can be passed. The Norwegian sovereign wealth fund has high moral standards for its investments. Decisions to exclude certain companies from the portfolio often send an important signal.

The “Statens pensjonsfond utland” recently put the Japanese beverage manufacturer Kirin on its watch list. The reason was the “intolerable risk” that the company would contribute to serious violations of the rights of individuals in situations of war or conflict. Thyssen-Krupp is also under observation: The German group represents an unacceptable risk because it may be responsible for corruption or contribute to it.