Norway halts ethical divestment rules for $2.1 trn sovereign wealth fund

Oslo pauses its ethics council's work amid political backlash and US pressure, reshaping how the world's largest investor approaches ESG

Norway’s parliament voted to pause “ethical” divestment from its $2.1 trillion sovereign wealth fund while it rewrites the rules, marking an historic moment for the world’s largest investor and raising fundamental questions about its approach to ESG.

The Labor government in Oslo relied on conservative opposition votes to force through the measure, which will allow the fund to retain stakes in companies including Microsoft Corp., Amazon.com Inc. and other tech giants. Under existing guidelines, their links with Israel’s war in Gaza could have forced the fund to divest.

 

It’s the first time in the wealth fund’s history that Norway has suspended the work of the ethics council. With those guidelines now on hold, Norway is opening the door to a new era for an investor that holds stakes in more than 8,500 companies worldwide and whose moves are tracked by money managers across the globe. 

 

Cecilie Hellestveit, one of five members on the ethics council, said it’s now an open question as to what role the advisory body should play.

 

“If we put our regular work on hold, this will undoubtedly will have consequences,” she told Bloomberg. “It’s unclear how big and what kind.” 

 

The wealth fund is now awaiting instructions from the finance ministry on how to handle ethical investment decisions going forward, a spokesperson said.

 

Recent decisions by the wealth fund that were based on guidance from the ethics council have drawn the ire of the US. In August, the fund cut Caterpillar Inc. from its portfolio citing the company’s supply of bulldozers to Israel which were later used in the Palestinian territories.

 

Key Republican figures were quick to respond, demanding that the US retaliate by imposing visa restrictions on the wealth fund’s executives. They also called for punitive tariffs on Norway in addition to the 15% imposed by the Trump administration.

 

Norwegian lawmakers backing the decision to suspend the ethics council’s work were “without a doubt” motivated by a “fear of Trump’s reactions,” said Ingrid Fiskaa, a member of parliament for Norway’s Socialist Left Party.

 

Norges Bank Investment Management, which manages the fund, operates under a mandate set by the Norwegian parliament with ethical guidelines on issues ranging from land mines to climate change. The ethics council assesses the portfolio on an ongoing basis and recommends companies for exclusion or observation.

 

When Norway’s parliament voted to halt the council’s work on Tuesday, it also agreed to review the fund’s mandate following a series of tense debates on the role of the investment vehicle as its assets continue to grow. 

 

Labor, which governs alone, was joined by right-wing opposition forces to get majority approval to suspend the ethics council’s work. Most of Labor’s traditional leftist allies opposed the move.  

 

The decision to suspend the powers of the ethics council is “tragicomic,” Sasja Beslik, chief investment strategy officer at SDG Impact, said on LinkedIn. “It will be hard to come back from this one.”

 

Finance Minister Jens Stoltenberg, the former secretary general of NATO, had demanded a review of the fund’s guidelines last month. He said “ethical considerations will still apply” to the fund’s investment decisions despite the suspension of the council’s work, in comments to public broadcaster NRK late on Tuesday.

 

In July, the UN Human Rights Council Special Rapporteur Francesca Albanese issued a report that called out US companies including Alphabet, Amazon, Microsoft, and Palantir Technologies Inc. for their involvement in Israel’s economy given allegations of apartheid, war crimes and genocide in its treatment of the Palestinian territories and response to the Oct. 7 attack by Hamas. Following the report, the US imposed sanctions on Albanese.

 

(Adds comment from wealth fund in sixth paragraph, analyst comment in 13th.)

©2025 Bloomberg L.P.