Norway wealth fund drops Bhel over environment concerns

Norway’s $940-billion sovereign wealth fund excluded Bharat Heavy Electricals, placed PetroChina Co and Leonardo SpA under observation and said it will follow up with Eni SpA and Saipem SpA on the risks of corruption.

Bharat Heavy was excluded from the fund “based on an assessment of the risk of severe environmental damage” after a recommendation from the Council on Ethics, the central bank, which oversees the fund, said in a statement. PetroChina and Leonardo were placed under observation, a preliminary step before a potential exclusion, based on an “unacceptable risk that the companies contribute to, or are responsible for, severe corruption,” the bank said. The ethics watchdog had recommended the fund exclude the companies.

The bank also went against the council's recommendation to put Eni and Saipem under observation, saying it will follow up with “active ownership” and “raise the issue of the risk of severe corruption” with the companies.         

“The Executive Board concludes that it is appropriate to use other measures, and that they probably will be better suited to reduce the risk of continued norm violations in these cases,” the bank said in the statement.

The world’s largest wealth fund takes into account ethical rules encompassing human rights, some weapons production, corruption, the environment and tobacco when deciding on its investments.