Ethical Guidelines for the Norwegian Government Petroleum Fund

issued 19 November 2004

1 Basis

The ethical guidelines for the Government Petroleum Fund are based on two premises:

-       The Government Petroleum Fund is an instrument for ensuring that a reasonable portion of the country’s petroleum wealth benefits future generations. The financial wealth must be managed with a view to generating a sound return in the long term, which is contingent on sustainable development in the economic, environmental and social sense. The Fund’s financial interests should be consolidated by using the Fund’s ownership interests to promote sustainable development.

-       The Government Petroleum Fund should not make investments that entail an unacceptable risk that the Fund is contributing to unethical actions or omissions, such as violations of fundamental humanitarian principles, gross violations of human rights, gross corruption or severe environmental degradation.

2 Mechanisms

The ethical basis for the Government Petroleum Fund shall be promoted using the following three mechanisms:

-       Exercise of ownership rights to promote long-term financial returns based on the UN’s Global Compact and the OECD Guidelines for Corporate Governance and for Multinational Enterprises.

-       Negative screening from the investment universe of companies that either themselves or through entities they control produce weapons whose normal use violates fundamental humanitarian principles.

-       Exclusion of companies from the investment universe where there is deemed to exist a considerable risk of contributing to:

-       Gross or systematic violation of human rights, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other child exploitation

-       Gross violations of individual rights in war or conflict situations

-       Severe environmental degradation

-       Gross corruption

-       Other particularly serious violations of fundamental ethical norms

3 The exercise of ownership rights

3.1

The primary objective of Norges Bank’s exercise of ownership rights for the Government Petroleum Fund is to safeguard the Fund’s financial interests. The exercise of ownership rights shall be based on a long-term horizon for the Fund’s investments, and broad investment diversification in the markets that are included in the investment universe. The exercise of ownership rights shall primarily be based on the UN’s Global Compact and the OECD Guidelines for Corporate Governance and for Multinational Enterprises. Norges Bank’s internal guidelines for the exercise of ownership rights shall stipulate how these principles are to be integrated into the exercise of ownership rights.

3.2

Norges Bank shall report on its exercise of ownership rights in connection with its ordinary annual reporting. An account shall be provided of how the Bank has acted as owner representative – including a description of the work to promote special interests relating to the long-term horizon and diversification of investments in accordance with Sections 3.1 and 3.2.

3.3

Norges Bank may delegate the exercise of ownership rights to external managers in accordance with these guidelines.

4 Negative screening and exclusion

4.1

The Ministry of Finance shall make decisions on negative screening and exclusion of companies from the investment universe based on the recommendations of the Government Petroleum Fund’s Council on Ethics.

The recommendations and decisions are to be made public. The Ministry can in certain cases postpone the time of public disclosure if this is deemed necessary in order to ensure a financially sound implementation of the exclusion of the company concerned.

4.2

The Government Petroleum Fund’s Council on Ethics shall be composed of five members. The Council shall have its own secretariat. The Council shall submit an annual report on its activities to the Ministry of Finance.

4.3

The Council is to issue recommendations at the request of the Ministry of Finance on whether an investment may be in violation of Norway’s obligations under international law.

4.4

The Council is to issue recommendations on negative screening of one or several companies on the basis of the production of weapons whose normal use is in violation of fundamental humanitarian principles. The Council is to issue recommendations on the exclusion of one or more companies from the investment universe where there is deemed to exist a considerable risk of contributing to actions or omissions that involve:

-       Gross or systematic violation of human rights, such as murder, torture, deprivation of liberty, forced labour, the worst forms of child labour and other forms of child exploitation

-       Gross violations of individual rights in war or conflict situations

-       Severe environmental degradation

-       Gross corruption

-       Other particularly serious violations of fundamental ethical norms

The Council is to raise matters under this section on its own initiative or at the request of the Ministry of Finance.

4.5

The Council is to gather the necessary information on an independent basis and ensure that the matter is elucidated as fully as possible before a recommendation concerning screening or exclusion from the investment universe is issued. The Council can request Norges Bank to provide information as to how specific companies are dealt with in the exercise of ownership rights. All enquiries to such companies shall be channelled through Norges Bank. If the Council is considering an exclusion recommendation, the draft recommendation, and the grounds for it, shall be submitted to the company for comment.

4.6

The Council shall review on a regular basis whether the grounds for exclusion still apply and can on receipt of new information recommend that the Ministry of Finance reverse the exclusion decision.

4.7

Norges Bank shall receive immediate notification of the decisions made by the Ministry of Finance in connection with the Council’s recommendations. The Ministry of Finance can request that Norges Bank inform the companies concerned of the decisions taken by the Ministry of Finance and the reasons for the decision.”