The Ministry of Finance has excluded Kerr-McGee Corporation
from the Petroleum Fund’s investment universe under the new ethical
guidelines. – The decision to exclude the company is based on a
recommendation from the Advisory Council on Ethics for the
Government Petroleum Fund, says Finance Minister Per-Kristian
Foss.
In December last year the exile
government of the Saharawi Arab Democratic Republic (SADR) and the
Western Sahara Support Committee requested that the Ministry of
Finance exclude Kerr-McGee Corporation from the Government
Petroleum Fund because of the company’s exploration of the
continental shelf off shore Western Sahara. According to the
Ethical Guidelines, the Ministry of Finance shall make decisions on
exclusion of companies based on recommendations from the Advisory
Council on Ethics for the Government Petroleum Fund. The Ministry
of Finance asked the Advisory Council to assess whether the
investment in Kerr-McGee might be inconsistent with the ethical
guidelines. This was the first request from the Ministry to the
Advisory Council.
– Obtaining and verifying
information on all aspects of companies’ activities is an exacting
task. Decisions to exclude companies must be well substantiated,
emphasises Finance Minister Per-Kristian Foss.
According to the Ethical Guidelines
of 19 November 2004, the Fund should not invest in companies that
produce weapons that may violate fundamental humanitarian
principles. Moreover, the Fund may not invest in companies if such
investments constitute an unacceptable risk of contributing to:
- Serious or systematic human rights violations, such as murder,
torture, deprivation of liberty, forced labour, the worst forms of
child labour and other forms of child exploitation
- Grave breeches of individual rights in situations of war or
conflict
- Severe environmental degradation
- Gross corruption
- Other particularly serious violations of fundamental ethical
norms.
In its letter of 12 April 2005, the
Advisory Council on Ethics for the Government Petroleum Fund
recommended that Kerr-McGee Corporation should be excluded from the
Fund’s investment universe. The Council based its recommendation on
the fact that the company through its subsidiary Kerr-McGee du
Maroc Ltd. has entered into an agreement with the state owned
Moroccan oil company ONAREP regarding petroleum exploration on the
continental shelf off shore Western Sahara. Morocco has for a
number of years occupied Western Sahara despite strong UN
condemnation. The Council found that Kerr-McGee through its
exploration activities most likely will enable Morocco to exploit
petroleum resources in the area. The Council regarded this as “a
particularly serious violation of fundamental ethical norms” e.g.
because it may strengthen Morocco’s sovereignty claims and thus
contribute to undermining the UN peace process.
According to the guidelines, the
Council submitted its recommendation to the company for comment.
The company maintained that its activity was not in violation of
international law. The Advisory Council did not change its
conclusion as it did not base its recommendation on an assessment
of international law, but on an assessment of whether the
activities in question are inconsistent with the Ethical
Guidelines.
Based on the recommendation, the
Ministry of Finance has excluded Kerr-McGee from the investment
universe of the Government Petroleum Fund. The Central Bank (Norges
Bank) as the manager of the Fund was informed about this decision
in a letter from the Ministry on 29 April. The disinvestment has
now been completed. At the end of the year 2004 approximately NOK
337 million of the Petroleum Fund was invested in stocks and bonds
in Kerr-McGee Corporation. The decision to exclude the company is
made public after the disinvestment has taken place in order to
secure a financially sound disposal of the securities.
The Ministry of Finance may request
the Council to assess if investments in individual
companies meet the ethical guidelines. In addition it is also
within the mandate of the Council to initiate analysis of other
companies. The Ministry has asked the Council to assess whether it
is in violation of the guidelines to invest in Total because of the
company’s activity in Burma. The Council is also assessing other
issues such as cluster weapons. It is likely that the Ministry of
Finance will be able to make decisions on these issues in the
course of the autumn.
Read more about the Advisory
Council on Ethics for the Government Petroleum Fund
here.
Read the Ethical Guidelines of 19
November 2004
here.
Read the recommendation from the
Petroleum Fund’s Council on Ethics, dated 12 April 2005,
here.
