World’s biggest wealth fund divests from tax dodgers

OSLO: Norway’s sovereign wealth fund, the world’s largest with assets of $1.3 trillion, said Thursday it had last year, for the first time, divested from companies it believes had dubious tax reporting practices.

The fund uses a slew of criteria in its investments — ranging from human rights and climate change to corruption — in order to measure companies’ sustainability and calculate their financial risk.

It informs the 9,100 companies worldwide in which it holds stakes of its expectations, holds discussions with them, and, barring compliance, can exclude them from its portfolio.

For the first time last year, it divested from seven companies, citing a lack of fiscal transparency, but did not specify which companies had fallen short.

“Our analysis showed that there may be an elevated risk of tax not being paid where economic value is created,” the fund wrote in a report on Thursday.

“These were also companies that had very weak or non-existent reporting on tax.”

In total, the fund divested from 32 companies in 2020 due to practices it said posed a financial risk.

That brings the number of companies blacklisted since 2012 to 314, including 170 for climate risks.

According to the fund the divestments have paid off and over the years they have increased the return on its share portfolio by around 0.41 percentage points, or 32.7 billion kroner (3.2 billion euros).

In addition to its own financial risk criteria, the fund also follows several purely ethical guidelines laid out by the Norwegian parliament, which bar it from investing in makers of nuclear or “particularly inhumane” weapons, and the coal and tobacco industries, among others.

The fund, in which the state places its oil revenues, is aimed at financing the future needs of Norway’s generous welfare state.

Despite the economic crisis sparked by the pandemic, it posted gains of more than $120 billion last year. Invested in stocks, bonds and real estate, it was on Thursday worth more than 11 trillion kroner ($1.3 trillion, 1.1 trillion euros).