Norway’s $1tn oil fund has sold out of the bonds of US utility PacifiCorp while it has placed its parent company Berkshire Hathaway Energy and fellow electricity group MidAmerican Energy under observation, meaning that it could exclude them from its portfolio in the future.
The actions mark the latest in the oil fund’s ethical investment process that has seen it sell out of more than 100 companies due either to product exclusions — such as from makers of tobacco and nuclear weapons — or those related to conduct such as environmental damage or child labour.
The fund is on its fourth round of exclusions for companies that derive more than 30 per cent of their business from coal and the three companies were part of its examination of its fixed-income portfolio whereas previous exclusions focused on shareholdings. That review also led to the exclusion of Tri-State Generation and Transmission, a US electricity seller.
The oil fund owned $164m in bonds in Berkshire Hathaway Energy as of the end of last year, $129m in PacifiCorp, $43m in Tri-State, and $33m in MidAmerican.
Among other notable actions announced on Tuesday, the fund also excluded JBS, the world’s largest meatpacker that has been engulfed in corruption allegations in Brazil. It owned $143m worth of shares in JBS at the end of 2017, the last date for which it had disclosed its position.
Former JBS chairman Joesley Batista and his brother Wesley, the company’s chief executive, signed plea bargains last year admitting to corruption, including bribing more than 1,800 politicians over several years. The brothers almost brought down President Michel Temer in May 2018 after Joesley submitted a tape to prosecutors in which he allegedly discussed bribes with the Brazilian leader.
The oil fund also decided to exclude Luthai Textile, a Chinese owner of clothes factories, for systematic human rights violations while it placed Nien Hsing Textile, a Taiwanese company, under observation for the same reason.
Finally, it said it would follow the efforts of Indian chemicals group UPL to rid itself of child labour through its active ownership process for the next five years. The oil fund owns 2.3 per cent of UPL, shares worth $137m at the end of 2017.
The fund’s ownership approach is followed closely by many other investors. Among the companies excluded are groups such as Airbus, Boeing, Japan Tobacco, Rio Tinto and Wal Mart.
The fund recently laid out the results of its exclusions, saying it had lost out on just under NKr30bn ($3.7bn) in returns since 2006 because of the product exclusions on the likes of coal and nuclear weapons, equivalent to lowering the return by 0.1 percentage points a year for the past decade. But exclusions for bad conduct — such as Duke Energy and Posco for severe environmental damage — had boosted returns by an average of 0.04 percentage points each year.
