Pensions, Ethics, Tobacco, and Fighter Jets

The following article about public pension management in Norway demonstrates the logic employed by the Norwegian government. Norway lionizes the terrorists of Hamas, but refuses as a matter of principle to allow any tobacco-related investments in its public pension portfolio.

Our Norwegian correspondent The Observer has translated an article with the latest news on pensions. He notes:

The Norwegian pension fund is currently estimated to be worth a staggering US $629 billion!

The translated article from VG.no, as posted at the subsidiary E24 Næringsliv:

The Norwegian pension fund lost Nok 10.6 billion due to ethics

The Norwegian pension fund’s ethical guidelines have slashed earnings by NoK 10.6 billion since 2005.

The calculation was undertaken by Norges Bank [Bank of Norway], and the amount was mentioned in the Government’s white paper on the management of the so-called Oil Fund, which was presented in March, according to Finansavisen.

55 companies are currently banned due to violations of the fund’s ethical guidelines.

In a government white paper on the management of the Pension Fund it has been revealed which ethical rules that have resulted in a reduction of profit. A list shows what the exclusions of various companies has cost the fund:

• Tobacco 9.6 billion
  
• Mining 2.8 billion
  
• Consumer 1.9 million
  
• Aerospace and Defense 0.8 billion
  
• General Industry 0.4 billion

The White Paper states that:

“Exclusions from the Fund are based on ethical considerations, and not financial ones. For an investor with a long-term perspective, there may be conformity between what is in the investor’s best financial interests and those that are chosen on ethical grounds, but not necessarily.”

In recent years a number of companies have been removed from the fund.

Christian Tybring-Gjedde, an MP from the FrP, is critical of the practice.

“The cost of the ethical guidelines has been immense. And what have we achieved? Has the world become a better place? Have the excluded companies changed their conduct? The practice is selective, inconsistent and completely ineffective,” Tybring-Gjedde tells Finansavisen.

He believes the government is guilty of double standards when it earns large sums of money on the sale of tobacco, while at the same time it considers it to be immoral to own shares in tobacco companies. He is also critical of the exclusion of the U.S. company Lockheed Martin from the fund.

“Lockheed Martin is excluded from the fund, but at the same time the government has decided to buy fighter jets from this company. The price is estimated to be close to US 100 billion dollars, in fact it is so expensive that the parliament has debated whether to take the money directly from the pension fund and not from the state budget,” Tybring-Gjedde says.