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The Government Pension Fund of Norway

 
Wikipedia: The Government Pension Fund of Norway
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The Government Pension Fund of Norway comprises two entirely separate sovereign wealth funds owned by the Government of Norway:

  • The Government Pension Fund - Global (formerly The Government Petroleum Fund)
  • The Government Pension Fund - Norway (formerly The National Insurance Scheme Fund)

Contents

The Government Pension Fund - Global

The Government Pension Fund - Global (Norwegian: Statens pensjonsfond utland, SPU) is a fund into which the surplus wealth produced by Norwegian petroleum income is deposited. The fund changed name in January 2006 from its previous name The Petroleum Fund of Norway. The fund is commonly referred to as The Petroleum Fund (Norwegian: Oljefondet). As of the valuation in June 2007, it was the largest pension fund in Europe and the fourth largest in the world [1], although it is not actually a pension fund as it derives its financial backing from oil profits and not pension contributions. As of 30 September 2009 its total value is NOK 2.549 trillion ($455 billion)[2], holding 0.77 per cent of global equity markets.[3] With 1.25 per cent of European stocks,[4] it is said to be the largest stock owner in Europe.[5]

The purpose of the petroleum fund is to invest parts of the large surplus generated by the Norwegian petroleum sector, generated mainly from taxes of companies, but also payment for license to explore as well as the State's Direct Financial Interest and dividends from partly state-owned Statoil. Current revenue from the petroleum sector is estimated to be at its peak period and to decline over the next decades. The Petroleum Fund was established in 1990 after a decision by the legislature assembly Storting to counter the effects of the forthcoming decline in income and to smooth out the disrupting effects of highly fluctuating oil prices.

The fund is managed by Norges Bank Investment Management (NBIM), a part of the Norwegian Central Bank on behalf of the Ministry of Finance. It is currently the largest pension fund in Europe and similar in size to the California public-employees pension fund (CalPERS), the largest public pension fund in the United States. NBIM forecasts that the fund will reach NOK 2.794 trillion ($463 billion) by the end of 2009 and NOK 4.769 trillion ($791 billion) by the end of 2014[6]. Since 1998 the fund has been allowed to invest up to 40% of its portfolio in the international stock market. In 2007 the Ministry decided to raise the stock portion to 60 %. This was achieved in August 2009.

Debate

Due to the large size of the fund relative to the low number of people living in Norway (4.7 million people in 2006), the Petroleum Fund has become a hot political issue, dominated by three main issues:

  • Whether the country should use more of the petroleum revenues for the state budget instead of saving the funds for the future. The main matter of debate is to what degree increased government spending will increase inflation.
  • Whether the high level of exposure (around 60% in 2008) to the highly volatile, and therefore risky, stock market is financially safe. Others claim that the high differentiation and extreme long term of the investments will dilute the risk and that the state is losing considerable amounts of money due to the low investment percentage in the stock market.
  • Whether the investment policy of the Petroleum Fund is ethical.

The Ethical Council

Part of the investment policy debate is related to the discovery of several cases of investment by The Petroleum Fund in highly controversial companies, involved in businesses such as arms production and tobacco. The Petroleum Fund’s Advisory Council on Ethics was established November 19, 2004 by royal decree. Accordingly, the Ministry of Finance issued a new regulation on the management of the Government Petroleum Fund which also includes ethical guidelines.

Excluded companies

The following companies have been excluded from the Government Pension Fund of Norway due to activities in breach of the Ethical Guidelines [7]

Company HQ Date of exclusion Reason Divestment (USD)
Alliant Techsystems Inc  United States June 30, 2005 Production of components for cluster munitions[8]. N/A [nb 1]
Barrick Gold Corporation  Canada Jan 30, 2009 Extensive environmental degradation related to the Porgera Gold Mine in Papua New Guinea [9] 245m
BAE Systems Plc.  United Kingdom October 11, 2005 Production of nuclear missiles for the French Air Force through the company MBDA[10]. N/A [nb 2]
Boeing Company  United States October 11, 2005 Maintenance of ICBMs for the U.S. Air Force[10]. N/A [nb 2]
European Aeronautic Defence and Space Company EADS N.V.  France
 Germany
 Netherlands		 June 30, 2005 Production of cluster munitions components[8]. N/A [nb 1]
Elbit Systems  Israel September 3, 2009 Supply of surveillance systems for the Israeli West Bank barrier [11] [12] [13] 5.0m
Finmeccanica Sp.A.  Italy October 11, 2005 Production of nuclear missiles for the French Air Force through the company MBDA[10]. N/A [nb 2]
Freeport McMoRan Copper & Gold Inc.  United States March 28, 2006 Serious environmental damage[14]. 17.2m
GenCorp Inc  United States November 15, 2007 Production of nuclear weapons[15]. N/A
General Dynamics Corporation  United States June 30, 2005 Production of components for cluster munitions[8]. N/A [nb 1]
Hanwha Corporation  South Korea May 15, 2007 Production of cluster munitions[15]. 1.2m [16]
Honeywell International Inc.  United States October 11, 2005 Simulations of nuclear explosions[10]. N/A [nb 2]
L3 Communications Holdings Inc  United States June 30, 2005 Production of components for cluster munitions[8]. N/A [nb 1]
Lockheed Martin Corp  United States June 30, 2005 Production of components for cluster munitions[8]. N/A [nb 1]
Northrop Grumman Corp.  United States October 11, 2005 Maintenance of ICBMs for the U.S. Air Force[10]. N/A [nb 2]
Poongsan Corporation  South Korea September 30, 2006 Production of cluster munition [17]. 1.2m
Raytheon Company  United States June 30, 2005 Production of components for cluster munitions[8]. N/A [nb 1]
Rio Tinto Group  United Kingdom April 28, 2008 Severe environmental damage[18] 882m
SAFRAN SA  France October 11, 2005 Production of nuclear missiles for the French Navy[10]. N/A [nb 2]
Serco Group Plc  United Kingdom November 15, 2007 Maintenance of British nuclear weapons through the Atomic Weapons Establishment[15]. N/A
Singapore Technologies Engineering  Singapore March 22, 2002 Production of anti-personnel landmines[19]. N/A
Textron Inc  United States Jan 30, 2009 Production of components for cluster munitions[20]. 36m
United Technologies Corp.  United States October 11, 2005 Production of engines for ICBMs in the U.S. Air Force[10]. N/A [nb 2]
Vedanta Resources Plc  United Kingdom August 28, 2007 Environmental and human rights abuses[21]. 12m
Wal-Mart Stores Inc.  United States March 28, 2006 Breach of human rights and labour rights [22]. 372m

The Fund does not announce exclusions until it has completed sales of its positions, so as not to affect the share price at the time of the transaction. [23]

Reinstated companies

Three previously excluded companies have later been reinstated to the fund, because the companies were no longer involved in the activities that led to their exclusion.

Company HQ Date of exclusion Reason Divestment (USD) Date of reinstatement
DRD Gold Limited  South Africa January 29, 2007 Serious environmental damage[24]. 0.6m September 3, 2009 [25] [26]
Kerr-McGee Corporation  United States April 29, 2005 Petroleum surveying in occupied Western Sahara [27] 54m June 30, 2006 [28]
Thales SA  France June 30, 2005 Production of components for cluster munitions[8]. N/A [nb 1] September 3, 2009[25][29]

The Government Pension Fund - Norway

The Government Pension Fund - Norway (Norwegian: Statens pensjonsfond Norge, SPN) was established by the National Insurance Act (Folketrygdloven) in 1967 under the name National Insurance Scheme Fund (Norwegian: Folketrygdfondet). The name was changed at the same time as the former Petroleum Fund on January 1, 2006. This fund continues to be managed by a separate board and separate government entity still named Folketrygdfondet. The Government Pension Fund - Norway had a value of NOK 106.9 billion at the end of 2006. Unlike the Global division, it is instructed to invest in domestic companies on the stock market, dominantly on Oslo Stock Exchange. Due to this, the Government Pension Fund - Norway is a key stock owner in many large Norwegian companies.

Notes

  1. ^ a b c d e f g The total divestment from the seven companies Alliant Techsystems Inc, EADS Co (European Aeronautic Defence and Space Company), General Dynamics Corporation, L3 Communications Holdings Inc, Lockheed Martin Corp, Raytheon Co and Thales SA was ca. 340m USD.[8]
  2. ^ a b c d e f g The total divestment from the seven companies BAE Systems Plc, Boeing Co., Finmeccanica Sp.A., Honeywell International Inc., Northrop Grumman Corp., Safran SA and United Technologies Corp was ca. 500m USD.[10]

References

  1. ^ Pension Funds Online. "Statistics". http://www.pensionfundsonline.co.uk/statistics/statistics.aspx. 
  2. ^ "Record-high return in third quarter". Norges Bank Investment Management. 2009-11-10. http://www.nbim.no/templates/article____75753.aspx. Retrieved 2009-11-10. 
  3. ^ Norges Bank. "Annual report 2008". http://www.norges-bank.no/templates/report____73483.aspx. 
  4. ^ John Acher and Wojciech Moskwa, Reuters. "UPDATE 2-Norway oil fund says still hunting for stocks". http://www.reuters.com/article/bondsNews/idUSLK23143720081120. 
  5. ^ Sindre Heyerdahl, E24. "OLJEFONDETS GIGANTTAP PÅ AKTIV FORVALTNING: Mener Gjedrem bløffer om investeringene" (in Norwegian). http://e24.no/makro-og-politikk/article2971889.ece. 
  6. ^ Norges Bank. "Forecast for the size of the Government Pension Fund". http://www.norges-bank.no/templates/article____42083.aspx. 
  7. ^ Norges Bank. "NBIM Annual Report 2007". http://www.norges-bank.no/Upload/NBIM/Reports/2007%20Part4.pdf. 
  8. ^ a b c d e f g h Norwegian Ministry of Finance (2005-09-02). "Åtte nye selskaper utelukket fra Petroleumsfondet" (in Norwegian). http://www.regjeringen.no/nb/dokumentarkiv/Regjeringen-Bondevik-II/Finansdepartementet/234231/234458/atte_nye_selskaper_utelukket_fra.html?id=256666&epslanguage=NO. 
  9. ^ http://www.regjeringen.no/en/dep/fin/Selected-topics/andre/Ethical-Guidelines-for-the-Government-Pension-Fund---Global-/Recommendations-and-Letters-from-the-Advisory-Council-on-Ethics/recommendation-on-the-exclusion-of-the-c-3.html?id=544365
  10. ^ a b c d e f g h Norwegian Ministry of Finance (2006-01-05). "Uttrekk av selskaper fra Statens pensjonsfond - Utland" (in Norwegian). http://www.regjeringen.no/nb/dep/fin/pressesenter/pressemeldinger/2006/Uttrekk-av-selskaper-fra-Statens-pensjonsfond---Utland.html?id=103778&epslanguage=NO. 
  11. ^ Norwegian Ministry of Finance (2009-09-04). "Supplier of surveillance equipment for the separation barrier in the West Bank excluded from the Government Pension Fund – Global" (in English). http://www.regjeringen.no/en/dep/fin/press-center/Press-releases/2009/supplier-of-surveillance-equipment-for-t.html?id=575444. 
  12. ^ Ethical Council of the Government Pension Fund of Norway (2009-09-04). "Recommendation on the exclusion of the company Elbit Systems Ltd" (in English). http://www.regjeringen.no/en/dep/fin/Selected-topics/The-Government-Pension-Fund/Ethical-Guidelines-for-the-Government-Pension-Fund---Global-/Recommendations-and-Letters-from-the-Advisory-Council-on-Ethics/the-council-on-ethics-recommends-that-th.html?id=575451. 
  13. ^ Herb Keinon and Yaakov Katz (2009-09-03). "Norway envoy summoned on divestment". Jerusalem Post. http://www.jpost.com/servlet/Satellite?pagename=JPost/JPArticle/ShowFull&cid=1251804480041. 
  14. ^ Norwegian Ministry of Finance (2006-06-06). "To selskaper - Wal-Mart og Freeport - trekkes ut av Statens pensjonsfond - Utland" (in Norwegian). http://www.regjeringen.no/nb/dep/fin/pressesenter/pressemeldinger/2006/To-selskaper---Wal-Mart-og-Freeport---trekkes-ut-av-Statens-pensjonsfond---Utland.html?id=104384&epslanguage=NO. 
  15. ^ a b c Norwegian Ministry of Finance (2008-01-11). "One producer of cluster munitions and two producers of nuclear weapons excluded from the Government Pension Fund - Global" (in English). http://www.regjeringen.no/en/dep/fin/Press-Center/Press-releases/2008/One-producer-of-cluster-munitions-and-tw.html?id=496485. 
  16. ^ The Council on Ethics (2008-01-11). "Recommendation on exclusion of the companies Rheinmetall AG and Hanwha Corp" (in English). http://www.regjeringen.no/en/dep/fin/Selected-topics/andre/Ethical-Guidelines-for-the-Government-Pension-Fund---Global-/Recommendations-and-Letters-from-the-Advisory-Council-on-Ethics/Recommendation-on-exclusion-of-the-compa-2.html?id=496492. 
  17. ^ Norwegian Ministry of Finance (2006-12-06). "Sørkoreansk klasevåpenprodusent utelukket fra Statens pensjonsfond - Utland" (in Norwegian). http://www.regjeringen.no/nb/dep/fin/pressesenter/pressemeldinger/2006/Sorkoreansk-klasevapenprodusent-utelukket-fra-Statens-pensjonsfond-Utland.html?id=437728&epslanguage=NO. 
  18. ^ Norwegian Ministry of Finance (2008-09-09). "The Government Pension Fund divests its holdings in mining company" (in English). http://www.regjeringen.no/en/dep/fin/Press-Center/Press-releases/2008/the-government-pension-fund-divests-its-.html?id=526030. 
  19. ^ Norwegian Ministry of Finance (2002-03-22). "Petroleumfondets Folkerettsråd - Notat til Finansdepartementet" (in Norwegian). http://www.regjeringen.no/nb/dep/fin/tema/andre/Etiske-retningslinjer/historikk/Notat-2-av-220302-Om-investeringer-i-Singapore-Technologies-Engineering-.html?id=413441&epslanguage=NO. 
  20. ^ http://www.regjeringen.no/en/dep/fin/Selected-topics/andre/Ethical-Guidelines-for-the-Government-Pension-Fund---Global-/Recommendations-and-Letters-from-the-Advisory-Council-on-Ethics/recommendation-on-the-exclusion-of-the-c-2.html?id=544363
  21. ^ Norwegian Ministry of Finance (2007-11-06). "Metals and mining company excluded from the investment universe of the Norwegian Government Pension Fund - Global" (in English). http://www.regjeringen.no/en/dep/fin/Press-Center/Press-releases/2007/Metals-and-mining-company-excluded-from-.html?id=488626. 
  22. ^ Norwegian Ministry of Finance (2006-06-06). "To selskaper - Wal-Mart og Freeport - trekkes ut av Statens pensjonsfond - Utland" (in Norwegian). http://www.regjeringen.no/nb/dep/fin/pressesenter/pressemeldinger/2006/To-selskaper---Wal-Mart-og-Freeport---trekkes-ut-av-Statens-pensjonsfond---Utland.html?id=104384&epslanguage=NO. 
  23. ^ "Norway's Big Ethical Giant" Vidya Ram, Forbes Magazine, January 30th, 2009, http://www.forbes.com/2009/01/30/norway-mining-weapons-markets-equity-0130_markets15.html?partner=yahoobuzz
  24. ^ Norwegian Ministry of Finance (2007-04-11). "Mining company excluded from the investment universe of the Norwegian Government Pension Fund - Global" (in English). http://www.regjeringen.no/en/dep/fin/Press-Center/Press-releases/2007/Mining-company-excluded-from-the-investm.html?id=462551. 
  25. ^ a b Norwegian Ministry of Finance (2009-09-03). "Thales SA and DRD Gold Limited to be reinstated in the Government Pension Fund – Global’s portfolio" (in English). http://www.regjeringen.no/en/dep/fin/press-center/Press-releases/2009/thales-sa-and-drd-gold-limited-to-be-rei.html?id=575442. 
  26. ^ The Council on Ethics (2009-02-13). "Recommendation to reverse the exclusion of DRD Gold" (in English). http://www.regjeringen.no/en/dep/fin/Selected-topics/The-Government-Pension-Fund/Ethical-Guidelines-for-the-Government-Pension-Fund---Global-/Recommendations-and-Letters-from-the-Advisory-Council-on-Ethics/recommendation-to-reverse-a-decision-to-.html?id=575438. 
  27. ^ Norwegian Ministry of Finance (2005-06-06). "Første selskap utelukket fra Petroleumsfondet" (in Norwegian). http://www.regjeringen.no/nb/dokumentarkiv/Regjeringen-Bondevik-II/Finansdepartementet/234231/234458/forste_selskap_utelukket_fra_petroleumsfondet.html?id=256344&epslanguage=NO. 
  28. ^ Norwegian Ministry of Finance (2006-09-01). "KerrMcGee Corporation tas inn igjen i Statens pensjonsfond - Utland" (in Norwegian). http://www.regjeringen.no/nb/dep/fin/pressesenter/pressemeldinger/2006/KerrMcGee-Corporation-tas-inn-igjen-i-Statens-pensjonsfond---Utland.html?id=271732&epslanguage=NO. 
  29. ^ The Council on Ethics (2009-02-13). "Recommendation to reverse the exclusion of Thales SA" (in English). http://www.regjeringen.no/en/dep/fin/Selected-topics/The-Government-Pension-Fund/Ethical-Guidelines-for-the-Government-Pension-Fund---Global-/Recommendations-and-Letters-from-the-Advisory-Council-on-Ethics/recommendation-to-reverse-the-exclusion-.html?id=575446. 

See also

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External links


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