Norway to Overhaul Wealth Fund Ethical Rules Amid US Scrutiny

Norway is expected to overhaul ethical rules for its $2.3 trillion wealth fund in response to findings from a state-appointed commission. The findings are due at 0700 GMT on Thursday, a year after Norway paused ethics-based divestments in the face of US scrutiny. The fund is the world's largest state-owned fund.

The Trump administration protested against the fund's divestment from Caterpillar shares over the use of Caterpillar bulldozers in Gaza and the occupied West Bank. Norway's parliament voted weeks later to pause ethics-based divestments pending the review. The government denied that concerns about the consequences of potentially upsetting the US motivated the pause. More than half of the fund's assets are invested in the US.

Before the suspension, the independent Council on Ethics sent divestment recommendations to the central bank's board, which had the final say. The board usually followed the council's recommendations. Since the suspension, all recommendations have instead gone to the fund's operator, Norges Bank Investment Management. The fund has made no divestments over that period.

Finance Minister Jens Stoltenberg said securing the fund was one of Norway's most important tasks. The fund finances a quarter of Norway's public spending. Stoltenberg said on Wednesday that increasingly integrated value chains made distinguishing between civilian and military products difficult. Stoltenberg also highlighted the concentration of the fund's value in a handful of companies, mostly US technology giants such as Nvidia, Apple and Amazon. Ten companies account for more than 20% of the value of the fund's share portfolio. Stoltenberg said this concentration meant individual decisions could have much greater consequences than in the past. Stoltenberg, a former NATO secretary-general, said his priority was for the fund to remain broadly invested. Stoltenberg said Norway should not undermine broad investment and must maintain a good ethical framework.

The commission's proposals will form the basis for government proposals in an annual white paper on the sovereign wealth fund, expected in spring 2027. One possible change concerns the ban on investing in companies making nuclear weapons or key components. The ban effectively rules out the world's largest defence companies. Stoltenberg asked the commission to consider whether nuclear weapons' role as a deterrent should be taken into account. A commission recommendation to lift the ban could allow the fund to invest in the largest defence companies.

The fund's exclusion list currently names Lockheed Martin, Boeing, Airbus, BAE Systems, Safran, Thales, BWX Technologies, Northrop Grumman, Fluor, General Dynamics, Huntington Ingalls Industries, Jacobs Solutions, L3Harris Technologies and L&T. Civil society groups, including the Norwegian Red Cross, say lifting the ban would legitimise investment in weapons of mass destruction. The Norwegian Red Cross said in its submission to the commission that Norway's investment of significant sums contributes to setting standards globally.

Stoltenberg previously said publishing the reasons for divestments posed dilemmas for the fund. After the fund sold out of a company, the Council on Ethics published its full recommendation and reasoning, based on months or years of investigations. Those recommendations provided a unique source of information for the public and other investors. Civil society groups are concerned that the recommendations might no longer be public because publication provides a key information source for the public and investors. Some activists are also concerned that the Council on Ethics could be removed altogether.