By Atle Sommerfeldt, Secretary General of Norwegian Church Aid
In the Standing Committee on Finance’s hearing on April 29 on the Norwegian Parliament’s report on the Government Pension Fund (SPU), the Norwegian Church Aid saluted the report for being progressive, particularly in its emphasis on the climate and the environment and measures to strengthen transparency. A sufficiently responsible management of the Fund still requires a higher level of ambition and more specific measures. The connection between oil wealth and the global common good, the climate, gives Norway a special responsibility for contributing to the fight against poverty, also with long-term investments.
A Solid Effort Directed at the Climate and the Environment
One of the new proposals is an environment and climate program of NOK 20 billion for investments in green technology. This is an important step in the right direction, although NOK 20 billion is not more than 1% of the current value of the Fund. There is no reason to believe that the long-term return on investments in green technology will be inferior to other sectors. Furthermore, such investments contribute positively to the productivity in other sectors through, for example, more efficient use of energy and reduced water pollution. The announced Expectation Document on Climate Change is a golden opportunity to create positive consequences for sustainable development by specifying expectations to all the companies in the portfolio of the SPU.
The Norwegian Government has suggested that the intended program for investing in developing countries, in so-called emerging economies, is to be included in the NOK 20 billion. It would significantly have strengthened the fight against poverty if this program had been made an addition to the environment program. The SPU depends on a well functioning world economy. The emerging markets are, as the term says, emerging, which indicates that the long-term return in these countries can easily surpass the OECD area.
Transparency in Financial Flows
Transparency is the area in which the interests of investors and civil society organizations concur the most. For the investors, increased access to reliable and verifiable information would contribute to optimizing investment decisions. For civil society, greater transparency is essential in order to combat corruption, tax fraud, and lacking democratic control of common resources. This concerns not least the oil, gas and mining business in which Christian Aid estimates that the developing countries lose tax revenues of USD 160 billion annually through erroneous internal pricing and false invoicing. The Norwegian Government’s work on introducing international accounting standards for country-to-country reporting is thus an important contribution. Norwegian Church Aid expects SPU to work actively in the time ahead to get the companies in the portfolio to become the first to introduce such a reporting, and that an Expectation Document that also demands transparency in company structure, tax payments and localization be drawn up.
Observation List
What is new of this year is a public observation list as a third measure in the Fund’s ethical tool kit. We believe that such a list can be an important and good supplement to the existing work. The objective of such an observation list ought to be twofold: Firstly, to make it clear that the pertinent company has an unacceptable practise that must be changed, secondly, to give the company the opportunity to change it. In order for such a list to have the greatest possible effect, the recommendations ought to have clear criteria, both in terms of time and in terms of content, to make it possible to remove a company from the list.
Withdrawal and The Principle of Participation
Withdrawal is a clear signal that the Government has concluded that the pertinent company is involved in unacceptable violations of basic rights and that it is considered unlikely that such a practice will cease. It is a dilemma that the people who are exposed to violations are then left to fend for themselves. An example of this is the mining company Barrick Gold’s conduct in Tanzania. Due to unacceptable handling of the environment in other parts of Barrick’s operation, the SPU have no investments in the company anymore. At the same time, Barrick has been sued in court in Tanzania by the local population for lack of compensation for land pursuant to Tanzanian law.
In such a situation, active ownership is no longer an option, but based on the principle of participation, the Norwegian government has still an ethical responsibility to maintain the interests of those who have been directly damaged. The largest group of withdrawal cases concerns as of today, the mining industry and environmental damages in which local populations and environments are left with serious environmental costs inflicted by companies that the SPU has been involved with. Financial support for legal aid will in such cases be a good and ethical way of maintaining the interests of those who bear the costs of unethical business operations. The Norwegian Government has a responsibility to establish mechanisms that make sure that those who are affected can have their cases tried before national or international courts and dispute instances.