In a testament to the financial prowess of Western economies, it’s not just the United States and high-performing Western European nations that wield significant financial influence. The reach of financial strength extends to smaller economies as well, notably Norway and its Scandinavian counterparts, Sweden and Denmark, all of which excel in economic output and material prosperity.
These Scandinavian countries consistently top global indexes in terms of socio-economic excellence, affording their citizens unparalleled benefits. Their reputation as havens of peace fosters socio-economic development and ensures exceptional living conditions for their populations.
Norway, in particular, stands out on the international stage for its robust investment portfolio. Holding the world’s largest single-stock market investor title, Norway’s sovereign wealth fund boasts assets totaling $1.4 trillion, with stakes in approximately 9,200 companies worldwide, equivalent to 1.5 percent of all listed stocks. This fund, primarily funded by revenues from Norway’s substantial oil and gas sector, was established in the early 1990s to support the nation’s generous welfare state system once oil reserves diminish.
The fund is diversified across equities, bonds, and real estate, serving as a state-owned investor focused on generating revenue for government programs and pensions. Stringent ethical guidelines govern its investment decisions, precluding investments in inhumane weapons manufacturers, the tobacco industry, and companies found guilty of human rights violations, severe environmental damage, or corruption.
As part of its ethical investment stance, Norway’s sovereign wealth fund has excluded 54 companies from its portfolio, including prominent names like Boeing, Lockheed Martin, Safran, Philip Morris, British American Tobacco, Wal-Mart, and Rio Tinto. Notably, it recently divested its stakes in US companies Jacobs Engineering and Babcock & Wilcox due to their involvement in nuclear weapons production. The European aerospace giant EADS, a shareholder in MBDA with military nuclear industry activities, remains on the fund’s blacklist.
In a commendable move, the fund reintroduced British company BAE Systems and Italy’s Finmeccanica after their joint venture, missile maker MBDA, ceased producing ASMP-A nuclear warhead missiles for the French army. The US chemicals group FMC Corporation also made a return to the fund after discontinuing its phosphate acquisitions in Western Sahara.
Additionally, the Norwegian finance ministry removed German company Siemens from its observation list after the company addressed corruption concerns raised in 2009.
Notably, the fund, primarily fueled by petrodollars, made a significant decision to reduce its exposure to the oil and gas sector. While this move is solely motivated by financial considerations, it is seen as a substantial blow to the fossil fuels industry and has garnered praise from environmental advocates. The Norwegian government clarified that the divestment targets exploration and production companies, safeguarding their common wealth from prolonged oil price declines. Importantly, this decision does not indicate a lack of confidence in the oil sector’s future.
This divestment decision may affect 134 companies, such as Chesapeake in the US, Canada’s Encana, China’s CNOOC, France’s Maurel, and Britain’s Tullow, among others, involved in upstream operations. However, integrated companies engaged in both downstream and upstream activities, including ExxonMobil, Shell, BP, and Total, remain unaffected. This divestment proposal addresses approximately $7.5 billion of the fund’s holdings in the oil and gas sector at the end of 2018.
Norway’s decision aligns with recommendations made by its central bank in 2017, aimed at reducing the state’s exposure to sharp oil price declines, such as the one witnessed in 2014.
Notably, Norway, for the first time, withdrew more funds from its sovereign wealth fund than it contributed. This development comes as the nation grapples with declining crude oil prices, leading to significantly reduced state oil revenues, which now fall below the national budget deficit.
Guided by strict ethical principles focusing on sustainable economic, environmental, and social development, the Norwegian government can withdraw up to four percent from the fund to balance its budget. This responsible approach stands in contrast to many oil-producing countries affected by the 70 percent drop in global crude prices since mid-2014, driven by oversupply.
Furthermore, the fund, for the first time, disclosed its voting record during this year’s annual shareholder meetings, emphasizing issues like executive pay and gender diversity on company boards. Since 2021, the fund has advocated for increasing the number of women on boards and has indicated that it will
vote against companies lacking female representation. The fund has also scrutinized executive pay, particularly the larger packages, which are growing at a faster rate than median pay and inflation.
This year, the fund voted against one in every ten CEO pay packages, demonstrating increased vigilance in the United States and beyond. Notably, it analyzed the structure of all US pay packages exceeding $20 million, voting against more than half due to misalignment with long-term value creation. Prominent figures like Coca-Cola’s James Quincey, Apple’s Tim Cook, and PepsiCo’s Ramon Laguarta faced opposition to their pay packages, as indicated by the fund’s voting record.
In summary, Norway’s sovereign wealth fund continues to be a global financial leader, demonstrating responsible investment practices and ethical principles while also wielding considerable influence in shaping corporate governance standards worldwide.
