"Hvis vi leter, så finner vi" ("If we search, we find")--Reflections on Council on Ethics for the Norwegian Government Pension Fund Global Annual Report 2022 [Etikkrådetfor Statens pensjonsfond utland: Årsmelding 2022]

 

If we search, we find. This is mostly the case for any deep dive into the majority of issues on our table. Over the past year, we have devoted considerable resources to labour rights, sometimes with a focus on forced labour, but we have also worked on companies’ contribution to the infringement of freedom of expression and the violation of human rights through mass surveillance, as well as the rights of indigenous peoples.  ["Hvis vi leter, så finner vi" ("If we search, we find") Dette vil være tilfelle ved dypdykk i de fleste tema. Vi har brukt mye ressurser på arbeidstakerrettigheter, tidvis med fokus på tvangsarbeid, men vi har også jobbet med medvirkning til brudd på ytringsfriheten, urfolks rettigheter, og brudd på ulike menneskerettigheter som følge av overvåkning.]

Eli Lund, Executive head of secretariat of the Council on Ethics for the Norwegian Government Pension Fund Global, has recently distributed, in ENGLISH and NORWEGIAN, the Council on Ethics for the Norwegian Government Pension Fund Global Annual Report 2022 [Etikkrådetfor Statens pensjonsfond utland: Årsmelding 2022]. 

The 2023 Report is interesting in a number of respects:

1. Automation. "In 2022, the Council worked on a total of 206 cases, relating to 193 different companies.
Of these, 81 were opened during the year, while 57 were opened in 2021. The assessment of 79 cases
was concluded during the year." (Annual Report 2022, p. 11). The Ethics Council continues to apply 19th century techniques of administrative authority, here expressed in its quasi-judicial, and quasi-administrative functions, to a set of functions in which the administrative apparatus is itself required to exercise (public) administrative discretion through the penetration of private markets by state organs and the governmentalization of private entities (and state instrumentalities acting in the private sphere).  The wisdom of that debate is long over (for the moment), that is the interpenetration of regulatory and markets spheres is an increasing reality where but the issue of utility and efficiency are now more clearly exposed. Here the issue for the Ethics Council and Norges Bank is squarely put: this touches on the nature of a preferred regulatory modality within markets and by states as market actors (in this case in financial markets). 

Pix Credit Casablanca here

On the one hand, the regulatory preference of the Ethics Council might be traditionally discursive--that is that its principle objective is to develop and deepen the discursive forms of rule making that can then be applied to objects of examination. This is a model grounded in the development and articulation of rules and their application. Rule development and articulation, then are its primary objectives. This is a UTILITY MODEL. It is grounded on the premise that the construction of an architecture of rules is the primary task of the regulator, whose investigative organs can then enforce selectively but in ways that then serve to leverage enforcement among the vast number of regulatory subjects that the administrative apparatus is unable to reach. And its methodologies are grounded in the traditional forms of prosecution and hearings that are at the heart of the 19th-20th century public administrative model.

On the other hand, the regulatory preference of the Ethics Council might be compliance oriented--that is that its principal object to to maximize the percentage of conforming behavior among those who may be subject to its oversight. The model is grounded on principles of compliance and quality control in the production of objects (economic, social, cultural) and the integrity of the processes by which that is undertaken. The objective is grounded in the core administrative principle of risk aversion of quality diffusion--prevent-mitigate-remedy. This is an EFFICIENCY MODEL. It is measured not by the coherent mellifluousness of discourse, but by the percentage of compliance and the success of accountability measures over the entire set of regulatory objects.It is undertaken empirically rather than discursively.  It is based on the ability to convert qualitative objectives and descriptors into qualitative  objects that can be measured, and against which conduct can be assessed.  And it s power lies in the ability to align administrative reaction to data based analytics so that real time nudging is achieved. Ratings systems in the West are a crude and early iteration. Automated civil fines and penalties grounded on data analytics is the future.

Pix Credit Here

There is a marked preference for the utility model in the liberal democratic West.  Perhaps because it provides the illusion of the primacy of politics and its legitimate expression as law.  And that is the problem really.  It is in the expression of power through law that the state exhausts itself. It leaves to the arbitrary cultures of administrative discretion to leverage that project, but with respect to which it prefers to turn a relatively blind eye. But it is easy, well worn, and provides a space where those craving some sort of entry into the vectors of power might be sated on partaking of its illusion. And that is the core problemmatique that the 2022 Report exposes. The Ethics Council, it seems, is quite content to build discursive castles on the web, and to apply them to the extent that it is humanly possible given the constraints of time and the capacity for a single human agency to act within budget. And that, in the 21st century is the problem.  It is time that the architecture of accountability shed its "Downton Abbey" props and move into something more appropriate ot the times.

2. ESG Issues. Administrative organs rarely practice what they preach.  Preaching is a function of the superior organs  crammed down to its objects who are in need of correction, rectification, and training.  This makes sense when one understands the masses as the aggregation of productive forces whose care and feeding is necessary for the production of value--including self-actualizing value. Human productive forces, it has been determined, thrive best under conditions of human rights and sustainability--as those are developed and applied by the herd-masters exercising discretion int he service of the larger project of generating national value.  The discourse of that valuer maximization has been masked of course, in the language of the autonomous individual and their prerogatives. But autonomy, like free will, is carefully curated and dispensed as a function of placement within hierarchies of social relations. 

There is something sadly pious about administrative organs imposing requirements, especially respecting risk and consequences that are human rights and sustainability tinged, in ways that it would not enter the regulator's head to apply to themselves. But that is common among our uncommon administrative organs as they assume the mantle of a European Leninist nomenklatura leading the rest of us to where ever it is they have been instructed to take us by the leading social forces of the nation manifesting themselves within the sort of networked governance elites so recently celebrated by its academic claque. 

Still. the 2023 Report reminds us of the importance of applying some of these mechanisms to the work of the Ethics Council itself.  Foremost among them are the risk sensitive techniques of ESG analysis, as flawed an underdeveloped as that analytic tool now stands (see, eg "The ESG Wars": Presentation of the University of Dundee (Scotland). In particular, the use of ESG measures for the assessment of the risk of analytical consequences might be quite therapeutic--and at least to might begin to develop practices of consistency in the judgments sometimes undertaken with a serendipitous relation to time and context. Thus for example, an ESG analysis of exclusion choices might be quite useful especially with respect to risk and consequences.  And at a minimum it would align the form of the Ethics Council's working style to the expectations developed in the UN Guiding Principles for Business and Human Rights--here the balancing aspects of which might prove most useful (discussed in the context of complicity here). 

3. The usual suspects approach to investigation. While the Report makes so suggestion about patterns of enforcement, it leaves a trail that is worth following. 

"'Major Strasser has been shot! Round up the usual suspects!' is the most memorable line from the film Casablanca. While emphasized and lampooned for comic effect, it underscores the fundamental logical problem in the use and abuse of statistics. . . It is the typical path taken by not-especially-competent bureaucrats in face of confusing (i.e. high variance situations): treat every instance as if it is the “usual,” and pretend to not see that the situation is potentially or actually extraordinary — i.e. the variance is very high, even if we don’t know the particulars necessarily. . . While it is easy to mock 'bureaucracy' for this, every organization, every decisionmaking process, is potentially liable to fall into this trap — because we cannot tell why every situation is not average." (Round up the Usual Suspects!).

There is sometimes a sense that wafts up from the Report of the Ethics Council playing Captain Renaud in rounding up the usual suspects for intervention. Yet it may not be a trap it has fallen into but a frame of mind that suggests an inherent bias enhanced by the needs of efficiency in the face of an enforcement model that invites selection of targeting. That ought to come as no surprise. The set up of the Ethics Council makes it virtually impossible both to effectively engage in its mission and to avoid  a little bit of profiling, or of strategic (and thus value enhancing) targeting.  This may be reinforced by the interpretive leaps the Ethics Council sometimes takes in drawing on an ecology of risk based assumptions (qualitatively derived) to automate (in a manner of speaking) investigation; its fact triggering analytics now streamline analysis but remain confined to the discursive tropes of case based decision making. And there is the trap and the frame of mind: as many now understand--efficiency in the form of profiling--can sometimes reveal prejudices and desires more than it explains the efficacy of investigation and enforcement that moves in particular direction to particular conclusions. To be sure--none of this may be intentional; but the structural incentives make it more likely that the Ethics Council should be more sensitive to structural or submerged bias under the circumstances of its operations.

That brings us back to ESG criteria to measure the extent of the risk of bias under the conditions of resource inadequacy or structural impediments to more broadly targeted enforcement. The Ethics Council has built a jurisprudence on the mechanics of risk--but it has been selective about the way it constitutes and assesses risk. The results can then skew, and that skewing can be increased by resource limitations and a need to prove that one's efforts produce results--decisions to exclude or observe targeted enterprises.  And it brings us back to the beginning of these reflections. Under these conditions, Eli Lund's statement-- "Hvis vi leter, så finner vi" ("If we search, we find")--can acquire a perhaps unwelcome meaning.  It becomes less clear what the Ethics Council is searching for--or whom--and to what ends.

The Foreword by the  Council Chair follows.

Foreword by the Council’s chair

The world is constantly changing, yet there is little variation year on year in the potential norm violations and risks assessed by the Council on Ethics. However, looking back at my eight years as chair of the Council, the changes are more noticeable.

The operationalisation of the updated ethical guidelines and new criteria has had a major impact on our work in 2022. A new criterion relating to the sale of weapons has resulted in several recommendations linked to the sale of weapons to Myanmar. The criterion on corruption has been expanded to include other serious financial crime, such as money laundering. We will soon embark on the challenging task of assessing our first cases under the expanded criterion, and we know that outside expectations in this area are high. Work on this criterion will be extensive, even though it may not result in a large number of recommendation. The adjustment of our mandate, requiring even closer coordination with Norges Bank, has been useful in many ways, also with respect to implementing these changes.

If we search, we find. This is mostly the case for any deep dive into the majority of issues on our table. Over the past year, we have devoted considerable resources to labour rights, sometimes with a focus on forced labour, but we have also worked on companies’ contribution to the infringe ment of freedom of expression and the violation of human rights through mass surveillance, as well as the rights of indigenous peoples. In 2022, like the year before, we assessed many cases relating to the violation of the rights of individuals in situations of war or conflict. Many ethical problems are well known and are covered by the media worldwide. Yet, the highly publicised cases are not always the Council’s main focus – at least not when the level of media attention is at its peak. When a country hosts a major sporting event, its human rights short comings are frequently the subject of much discussion. In such circumstances the spotlight is
on companies in the Fund. The Council started investigating forced labour in the Gulf states in 2015, well before the spotlight was turned on, and we will continue to monitor developments well after the stadium lights have been turned off. However, there are many other countries across the world where migrant workers or minority groups are subjected to unacceptable conditions. The Council prioritises the most serious cases and the companies most closely associated with the norm violations.

With respect to the environment, we focus on activities that impact areas of particular importance for the world’s natural heritage or that constitute an increased risk endangered species becoming extinct. Many of our cases relate to deforestation, various types of pollution or the harvesting of natural resources through, for example, mining or the construction of hydroelectric power schemes. Renewable energy is space intensive to produce and creates new markets for rare minerals. The green transition could therefore cause increased pressure on the natural environment in the years to come. At the same time, there is growing international awareness of our shared global responsibility to protect nature and its bounty. In December 2022, Norway joined 195 countries in agreeing to the Kunming Montreal Global Biodiversity Framework, which contains ambitious global goals and targets for the protection and restoration of nature. An innovative aspect of this agreement is that it contains clear goals for what business and the financial sector must do to help stop the loss of biodiversity. This could lead to the development of new norms and new
systems for environmental impact monitoring and reporting in the years ahead.

When I became the Council’s chair in 2015, the use of artificial intelligence in modern weapons systems posed a merely hypothetical risk of serious future norm violations. Yet even at that time, the Council voiced its concerns about lethal autonomous weapons systems. The first confirmed use of an autonomous drone in a theatre of war came in 2020. Wars of increasing intensity, like that in Ukraine, as well as geopolitical tension in Asia, may provide incentives for the accelerated development of such systems.

Lethal autonomous weapons systems are not currently included in the list of weapons that constitute grounds for exclusion from investment by the GPFG. Nor is the Council aware of any GPFG related companies that produce such weapons.

Instead, rapid technological progress has also brought the mass surveillance sector to the Council’s attention. It represents a permanent and growing risk of contributing to serious norm violations. Such products and services infringe many fundamental rights and may contribute to detention on political grounds, torture and murder in the service of the state. Mass surveillance which enables states to perpetrate such human rights violations may be performed by means of equipment and services supplied by companies in which the GPFG is a shareholder. The intrusion of algorithms into our daily lives through the products and services supplied by GPFG related companies will probably become a new topic for the Council. In this field, regulations are under way, but they are mostly regional in nature and their implementation is slow. The Council can therefore be a part of driving forward these emerging norms for responsible business conduct. 

This is the last foreword that I will write for the Council’s annual report. It has been a great privilege for me to chair the Council on Ethics for more than eight years. Very few positions in Norway offer the opportunity to make a real difference in the world – and to do so together with a team of highly dedicated professionals at the Ministry of Finance, Norges Bank and the Council on Ethics. I would particularly like to commend the Council’s secretariat, who perform their mission in an exemplary fashion, and on whose tireless efforts we are all entirely dependent.  In 2015, the set up of our institutions had just been amended. This resulted in a challenging process of hammering out demarcation lines, increasing transparency and settling on the roles and responsibilities for initiating cases. But with the good will of all parties, and a growing understanding of the fact that we are all part of a joint effort, I believe that we have succeeded
in creating a solid platform for our collaboration and its further development. We have all strengthened our respective teams. And, yes, people do make a difference.

Nevertheless, one question still lingers, and perhaps it always will; is the threshold for exclusion
too high? When the level of responsible behaviour expected of GPFG related companies and of
those who invest in them increases, should the Council on Ethics – in the exercise of its mandate
– adjust the threshold correspondingly? We constantly question whether our threshold is in line
with these expectations. It is a tough job, but someone’s got to do it.