INTERVIEW-Norway oil fund may sell out of mines that mistreat workers

Wed May 29, 2013 9:24pm IST

Stocks

   

* Fund's ethics council investigating mining sector

* Focus is on whether slave-like working conditions

* Council also eyeing cattle-ranching, illegal fishing

By Gwladys Fouche

OSLO, May 29 (Reuters) - Norway's $740-billion sovereign wealth fund, the world's largest, is examining labour conditions in the mining industry and may sell out of firms that violate workers' rights, the head of the fund's ethics council said.

The fund could also divest from companies involved in cattle ranching, if working conditions on farms are exploitative, and from firms implicated in illegal or unregulated fishing.

"Working conditions, slave-like working conditions, ... is a very important priority," said Ola Mestad. "We have been trying to identify different sectors: (one of them) could be mining."

The fund invests Norway's revenues from oil and gas production for future generations. It is one of the world's largest investors with holdings in some 7,500 companies.

It has excluded firms for what it deems to be unethical behaviour based on the advice of its ethics council, an independent body reporting to the finance ministry, which has ultimate responsibility for the fund. The ministry tends to follow the council's recommendations.

The fund also bans investments in some industries - nuclear arms, anti-personnel landmines, cluster bombs and tobacco.

The fund last excluded tobacco producers Schweitzer-Mauduit and Huabao International Holdings earlier this month, citing their involvement in the production of reconstituted tobacco leaf.

The fund has holdings in hundreds of mining firms and has invested heavily in the biggest ones.

The council will also be investigating potential labour abuse in cattle ranching - the raising of livestock on large farms, usually in South America.

Mestad said it was very difficult to investigate labour abuse in those two industries.

"Although there is widespread labour abuse in the world, it is not usually related directly to the multinational companies in which we are invested: it will be in the supply chain," said the law professor at the University of Oslo.

"So the question of when to attribute (responsibility) to the multinational companies is extremely complicated," Mestad said in the interview late last week.

This week, a committee set up to safeguard the Organisation for Economic Cooperation and Development's guidelines for multinational companies said the fund lacks "a strategy for identifying and handling possible violations of human rights in the companies they invest".

It pointed to the fund's investment in South Korean steel maker POSCO, which plans a $12 billion steel plant in India that critics say will displace thousands of people. POSCO says it has never infringed any human rights.

The fund is managed for Norway's central bank by Norges Bank Investment Management (NBIM), which said it did not think the OECD guidelines should apply to it as a minority shareholder.

According to a 2010 report by the International Labour Organisation, mining is responsible for about eight percent of fatal accidents at work, even though it accounts for just one percent of the global workforce.

No reliable data exist on injuries, said the ILO, but they are significant, as is the number of workers affected by such disabling occupational diseases as pneumoconiosis, hearing loss and the effects of vibration.

CATTLE AND FISH

When it comes to cattle ranching and illegal fishing, the fund has invested in close to 80 firms involved in the production of food, according to Reuters data. It is unclear how many of these may be involved via their suppliers in the activities investigated by the fund.

Unregulated fishing is fishing by vessels without nationality or flying the flag of a country that is not party to the regulations governing a fishing area. Mestad said it was difficult to investigate the practice.

"It is extremely complicated because of the ownership structure," he said. "Ownership of ships changes all the time, partly to conceal what is going on, partly to get fishing licenses."

Mestad said the fishing firms the fund was invested in were typically small companies from South East Asia, Russia and South America that were either involved in the catching, processing or wholesale distribution of fish. (Editing by Anthony Barker)

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