Norway pension fund blacklists Aramco, other Gulf companies

Norway’s largest pensions’ manager divested US$15 million from Gulf companies on concerns they may facilitate human rights violations, and decided to exclude Saudi Aramco because of climate risks. 

KLP, which oversees US$70 billion, blacklisted a dozen companies listed in Saudi Arabia, Qatar, the United Arab Emirates and Kuwait from its investment universe. The divestments mostly reflect an “unacceptable” risk of contributing to human rights abuses, KLP said, with Aramco targeted separately for its negative impact on the environment. 

The excluded firms included companies in the real estate sector, where KLP says migrant workers from Africa and Asia have faced discrimination and human rights violations. The pension fund also targeted the telecommunications sector, where it cited the development of artificial intelligence as reinforcing the risk of surveillance and censorship in the region.

“Gulf states remain characterised by authoritarian systems of government that restrict freedom of expression and political rights, including of critics and human rights activists,” said Kiran Aziz, KLP’s head of responsible investment, in a statement.

The stocks which were blacklisted were mixed on Thursday (Dec 28), with some trading higher along with emerging-market peers, while others slipped.

Aramco edged lower, tracking an overnight drop in oil. Foreign investors generally have a smaller exposure to Gulf markets – which comprise just over 7 per cent of the MSCI Emerging Markets Index – due to smaller free floats and more recent inclusions to the benchmark. 

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KLP manages pensions for the public sector, including Norwegian municipalities, and describes itself as a responsible investor that’s willing to divest from companies for environmental, social and governance reasons.

In recent years, it has targeted Adani Green Energy on concerns the company might have inadvertently helped finance polluting activities via its stake; US-based firms overseeing refugee centres linked to human right violations; and companies tied to Israeli settlements in the West Bank.

KLP’s Aziz said Aramco was excluded primarily because the oil and gas producer’s energy transition plan failed to meet expectations.

The pension fund said it has found engaging with companies in the Gulf states to be fruitful, but added that it’s difficult for shareholders to influence Aramco as it’s mostly state-owned.

KLP said the US$15 million divestment amount would have been roughly US$27 million if its investments more closely matched the index weightings of the stocks. BLOOMBERG