Reefer Madness--The Norwegian Pension Fund Global Announces a New Batch of Exclusions

 

 

Norges Bank announced the exclusion of nine companies from the GPFG’s investment universe, following the Council on Ethics’ advice. There are no surprises.  As usual one notes the signalling that this batch of decisions appears to make.  Environmental risk remains an important element (with a focus on traditional heavy industries).  Tobacco is an oldie but goodie.  

And Cannabis is a new, though to my mind, a needlessly faddish and prissy interdiction. The rationale reads like a bad replay of 20th Century Reefer Madness clothed in the narcotic of discursive legal morality that was once the province of the proscriptions against a variety of sexual activities (for the analogue, e.g., here).

The Norwegian Ministry of Finance gave the following reason for adding the production of
cannabis for recreational use as a new product-based criterion in the guidelines:

Cannabis is a narcotic substance that is illegal to produce and sell in Norway, and Norway has ratified the International Drug Control Conventions. In the Ministry’s opinion, this expresses a fundamental value about which there is broad agreement in the population and which indicates that the production and sale of cannabis for recreational use should be included as a new criterion for the exclusion of companies from the GPFG. (Meld. St. 24 (2020-2021) Report to the Storting, 7.4.3.3).

Scene from Reefer Madness (1936) Credit HERE

Worse, perhaps, is the cultural imperialism inherent in the determination--clothed as it is in international law fig leaves. This is hardly an area where the majesty of Norwegian attitudes toward recreational drugs freely available elsewhere ought to be projected through its financial market power.  But it does prove once again that in some instances Norwegian internationalism through private markets at times descends to the projection of Norwegian state policy through the artifice (in this case) of international norms (for an early discussion, see "Sovereign Wealth Funds as Regulatory Chameleons: The Norwegian Sovereign Wealth Funds and Public Global Governance Through Private Global Investment ").

Make no mistake--Norway is quite entitled to whatever policy it, through its democratic mechanisms--wishes to impose on itself.  But here one speaks of privatized internationalist imperialism--at least with respect to cultural and social choices with respect to which Norway ought to perhaps consider a more enlightened approach. In any case, the bottom line--Norway is free to invest or not invest in any class of entity of its choice.  Nonetheless that justification is national not international and that may significantly reduce the legitimacy of the internationalist project represented by the management of the Pension Fund Global.

 The Norges Bank Announcement follows with links.

Decisions on observation and exclusion

Norges Bank has decided to exclude nine companies from the Government Pension Fund Global.

7 September 2022

Norges Bank’s Executive Board has decided to exclude the companies Aurora Cannabis Inc, Canopy Growth Corp, Cronos Group Inc, and Tilray Brands Inc on the basis of “the fund not being invested in companies which themselves or through entities they control: (…) c. “produce cannabis for drug purposes”, ref. the product-based criteria in section 3 (1) (c) of the Guidelines for Observation and Exclusion from the Government Pension Fund Global. Under section 2 of the guidelines, recommendations and decisions under section 3 can also “apply to companies that are only in the benchmark index or that will be included in the benchmark index”. The four companies are not in the fund’s portfolio, but in the benchmark index. The decision is based on recommendations from the Council on Ethics of 30 March 2022 and 3 May 2022 respectively.

The Executive Board has also decided to exclude the companies Scandinavian Tobacco Group A/S, Eastern CO SAE, and Hanjaya Mandala Sampoerna Tbk PT on the basis of “the fund not being invested in companies which themselves or through entities they control: (…) b. “produce tobacco or tobacco products”, ref. the product-based criteria in section 3 (1) (b) of the Guidelines for Observation and Exclusion from the Government Pension Fund Global. Under section 2 of the guidelines, recommendations and decisions under section 3 can also “apply to companies that are only in the benchmark index or that will be included in the benchmark index”. Scandinavian Tobacco Group A/S, Eastern CO SAE, and Hanjaya Mandala Sampoerna Tbk PT are not in the fund’s portfolio, but in the benchmark index. The decision is based on recommendations from the Council on Ethics of 24 February 2022 and 30 March 2022 respectively.

Furthermore, the Executive Board has decided to exclude the companies NHPC Ltd and Young Poong Corp due to unacceptable risk that the companies contribute to severe environmental damage, ref. the conduct-based criteria in section 4 (1) (e) of the Guidelines for Observation and Exclusion from the Government Pension Fund Global. The decision is based on recommendations from the Council on Ethics of 24 February 2022 and 1 March 2022 respectively.

The Executive Board has not conducted an independent assessment of all aspects of the recommendations, but is satisfied that the observation and exclusion criteria have been fulfilled. Before deciding to exclude a company, Norges Bank shall consider whether the use of other measures, including the exercise of ownership rights, may be better suited. The Executive Board concludes that it is not appropriate to use other measures in these cases.

The Council on Ethics’ recommendations:

Hanjaya Mandala Sampoerna Tbk PT
Eastern Co SAE
Tilray Brands Inc
Cronos Group Inc
Aurora Cannabis Inc
Canopy Growth Corp
Young Poong Corp
Scandinavian Tobacco Group A/S

NHPC Ltd