Norway ethics watchdog sets sights on shoemakers and crypto firms

Oslo — The Norwegian sovereign wealth fund’s ethics watchdog will next year investigate shoemakers, crypto firms and gambling operators in which the fund has holdings for potential ethical breaches, which could lead the influential investor to sell its shares.

The world’s largest sovereign wealth fund, which owns 1.5% of listed shares across 8,700 companies globally, operates under ethical guidelines which are set by Norway’s parliament.

The $1.8-trillion fund’s Council on Ethics investigates companies in which it has money invested to ensure these are respected. If they are not, the ethics watchdog recommends the fund divests from them or puts them on a public watch list.

A document drafted by the council and sent to the finance ministry on October 10, which was seen by Reuters, said that next year it “will investigate work conditions at a significant number of shoe producers”, without naming any.

Working conditions at shoe factories in Asia have been under the spotlight for decades, with issues ranging from long hours and low pay to the right to form unions.

The document outlining the plan for 2025, which has not been previously reported, said: “Companies have a direct responsibility for working conditions within their own operations and gross, systematic breaches of workers’ rights can lead to exclusions from the fund”.

The watchdog said in an emailed statement that its programme “indicates that these are issues the council will look into”, adding: “It is not possible for the council to predict the outcome of the investigations”.

Norway’s fund excludes 189 companies on ethical grounds, including Airbus and Boeing for making nuclear weapons and Glencore and RWE for producing coal or coal-based energy.

Other criteria which dictate its investment decision-making include violation of human rights, severe environmental damage, gross corruption or producing tobacco and cannabis.

The fund invests in some of the biggest shoe manufacturers, including Nike, with a 0.9% stake worth $1bn, Adidas, with a 3.6% stake worth $1.5bn and Puma, with a 1.5% stake worth $100m.

Others include Deckers, in which the fund has a 1.2% stake worth $300m, Asics, where its holding of 2.7% is worth $310m, Birkenstock, in which it has 1.7% worth $170m and Crocs, with 1.2% worth $100m.

Adidas said last week it had taken “a variety of measures to ensure fair and safe working conditions for workers in its supply chain” over the past 25 years, including conducting 1,200 factory audits last year.

Puma said it had invested “a vast amount of time and resources ... to ensure a very high standard regarding environmental, social and governance (ESG) topics” for the past 20 years, including requiring all suppliers to sign up to a legally binding code of conduct and actively investigating breaches reported. The company said it had high ESG ratings and rankings from MSCI, S&P, ISS and CDP, and was therefore “fully open to collaborate” with the Council on Ethics should it have questions.

Nike, Deckers, Asics, Birkenstock and Crocs did not respond to requests for comment.

The document outlines work the ethics watchdog has already started, as well as new areas for investigation next year.

“The Council on Ethics in 2025 will take a closer look at companies involved in cryptocurrencies and gambling/casino, where there is a significant risk of money laundering,” it said.

Norway’s fund is invested in cryptocurrency exchange Coinbase, with a 0.83% stake worth $453m as well as gambling firms Flutter Entertainment, in which it has a 2.13% stake worth $691m and MGM Resorts, where its 0.87% stake is worth $121m.

Coinbase, Flutter Entertainment and MGM Resorts did not immediately reply to requests for comment.

Elsewhere, the watchdog will continue to investigate “several companies” that could be breaching human rights in the occupied West Bank.

The Council on Ethics makes recommendations to the board of the central bank, which operates the fund. The bank often follows the watchdog’s advice to exclude firms, but not always.

It can also put a company on notice to change its behaviour or ask the fund’s management to engage directly. Those designated for divestment are not named until the fund has sold.

The length of time to divest can range from weeks to months, depending on the size of the company. The fund divests from a company progressively so as not to alert markets.

Reuters