According to the guidelines for observation and exclusion of companies from the Pension Fund Global, Section 2 (1) b), “The assets in the Fund shall not be invested in companies which themselves or through entities they control: […] produce tobacco”. The Council has assessed Grupo Carso and the company has made it clear that it owns 69.94 percent of the company Compañia Mercantil de Productos de Tabaco S.A de CV, which produces tobacco products. The company has also stated to the Council that it owns 20 percent of Philip Morris S.A de CV, which produces cigarettes. Against this background, the Council has recommended that Grupo Carso be excluded from the Fund’s investment universe.(From Norway Ministry of Finance, Press Release: Tobacco producer excluded from the Government Pension Fund Global, Aug. 24, 2011).
The GPFG’s ethical guidelines’ paragraph 21 states,
“The Fund’s shares shall not be invested in companies which, themselves, or through entities they control, produce tobacco.”
The Council on Ethics continuously monitors the Fund’s investment portfolio in order to identify companies which carry out activities that may be inconsistent with the ethical guidelines. This review has shown that the Mexican company Grupo Carso SAB de CV2 could be involved in the production of tobacco.
2 Contact with the company
In September 2010, the Council on Ethics sent a letter to Grupo Carso SAB de CV to enquire as to whether the company produces tobacco3, either itself or through entities under its control. The company responded to the inquiry and made it clear that it owns 69, 94 percent of the company Compañia Mercantil de Productos de Tabaco S.A de CV, which produces tobacco products. The company further informs that it owns 20 percent of Philip Morris S.A de CV, which produces cigarettes.4
3 The Council on Ethics’ evaluation
The Council on Ethics considers that the company’s ownership of Compañia Mercantil de Productos de Tabaco S.A de CV falls within the ethical guidelines’ criterion of control. Consequently, Grupo Carso SAB de CV produces tobacco through a company it controls.
Based on the information above, the Council on Ethics recommends the exclusion of the company Grupo Carso SAB de CV Ltd. from the investment universe of the Government Pension Fund Global.
Gro Nystuen Dag Olav Hessen Ylva Lindberg Ola Mestad Bente Rathe Chairman
1 The guidelines for the observation and exclusion of companies from the investment universe of the Government Pension Fund Global
2 Sedol: 2393452
3 Letter from the Council on Ethics to Grupo Carso SAB de CV, 16 September 2010 4 Letter from Grupo Carso SAB de CV to the Council on Ethics, 22 October 2010
Second, this decision suggests the potential value to routinization. Where, as in this case, the rules are clear, and the only issue is factual, it ought to be possible to streamline the process from investigation to recommendation and action by the Ministry of Finance. Even if the ultimate decision of the Ministry is effectively political--in routine cases, like this one involving the production of tobacco with respect to which there is little controversy in Norway, the time to decision could be reduced by simple techniques. For example, in cases like tobacco, it would be a simple matter to institute a rule that recommendations of the Council will be automatically adopted unless, within 30 days of receipt, the Ministry either stays the exclusion or reveres it. Moreover, routine cases might also be easier to transmit to the Ministry in the form of summary proceedings. The Council comes close in the form of recommendation adopted in this case.