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The Norwegian Sovereign Wealth Fund, its Pension Fund Global, continues to slowly, methodically, and perhaps simplemindedly, forge its own path forward toward the perfection of its model of public sector driven private sector apparatus of regulatory supervision.
All these regulations stem from the EU Green Deal (“Green Deal”), with the intention that sustainability “should be further embedded into the corporate governance framework, as many companies still focus too much on short-term financial performance compared to their long-term development and sustainability aspects”. This thinking on the relationship between sustainability, long-term strategy and corporate governance has since been captured under the heading “Sustainable Corporate Governance” or “Sustainability Governance”. In addition to the CSRD, the CSDDD aims to further “due diligence” duties in the value chain (particularly the supply chain) (i) to safeguard human rights and limit/prevent adverse environmental impacts and (ii) to take measures to combat global warming and related climate change. All these newly created legal obligations have to be monitored and supervised by regulators. This is, however, much easier said than done. Due diligence duties are fundamentally different from traditional rules and regulations as they are both broad and indeterminate. That will make it inevitable that new concepts of regulatory supervision have to be explored and developed. (Harm-Jan de Kloivier, "Towards a Framework for Effective Regulatory Supervision of Sustainability Governance in Accordance with the EU CSDD Directive. A Comparative Study" (2023) 20 European Company and Financial Law Review 203-239)
That model. in turn, is imperiled in other human rights related sectors--most notoriously under the roll back umbrella of the Omnibus initiative.
The European Commission has adopted new proposals that will cut red tape and simplify EU rules for citizens and business. In the recent Competitiveness Compass, the Commission set out its vision to make the EU’s economy more prosperous and competitive, building on the recommendations of the Draghi report. To regain competitiveness and unleash growth, the EU needs to foster a favourable business environment and ensure that companies can thrive. The first two so-called Omnibus packages of simplification measures aim to achieve this. The measures will focus the sustainability reporting obligations on the largest companies which are more likely to have the biggest impacts on people and the environment, and make sure they do not burden smaller companies. (Commission proposes to cut red tape and simplify business environment)
Private sector regulatory supervision, on the other hand, appears less affected by these advances and retreats on the creation and operation of a public sector legal framework for the regulatory supervision of market actors by a corps of techno bureaucrats assigned to align corporate activity with public purpose. Here the regulatory supervision is tied to two related but distinct interventions--the first revolves around determinations to cut an offending company from the investment universe of the Fund. The second is almost its opposite--to put a company under observation; a determination to more intensely supervise a company through the exercise of shareholder power.
It is in this context--the context of the continued development of a very limited and specific form of private sector public regulatory supervision, that the recently decided actions by Norges Bank, responding to decisions of the Fund's Ethics Counsel assume some interest. The first continues the development of the facilitation doctrine and deepens the commitment of Norway to rid Palestine (as they define it) of Jewish settlers whose presence on Palestinian territory was irregular (Paz Retail and Energy Ltd ). The second case continues the Fund's campaign against corruption in State owned or controlled enterprises, this time focusing on Mexico's Petroleos Mexicanos (Pemex). In both of these cases the targeted enterprises were excluded form the Fund's investment universe. The last two actions, and perhaps most interesting focus on the Fund's approach to enterprise actions respecting the negative environmental impacts of their economic activities. Both of those cases (Rio Tinto; South 32 Ltd) involved economic exploitation of natural resources in the Amazon rain forest. And in both cases Norges Bank chose active oversight--"special ownership dialogue"--over exclusion. Dialogiue, then, becomes the basis of regulatory supervision, the structures of which are integrated into the traditional supervisory and social relationships between shareholders and boards of directors.
The differences in treatment suggest an element of functional differentiation among violation types. Environmental degradation is the sort of activity that can be monitored, assessed and corrected through active oversight as a function of standards, objectives, reporting and effective measures addressing negative impacts. All of this is the stuff of the now well understood methodological structures of the UN Guiding Principles for Business and Human Rights. In both Rio Tinto and South 32 Ltd the difference between the Ethics Council (which recommended exclusion and Norges Bank, which chose observation) revolved around the EC's belief that "rehabilitation of deforested areas is unlikely to mitigate the environmental damage resulting from the removal of intact rainforest." That, in turn, suggests a difference in strategy and weighing options in cases where remedy is available even if prevention and perhaps a wholly effective mitigation is unavailable.
Corruption has also sometimes produced a decision to engage in private sector public regulatory supervision. In this case, however, there were two structural factors that militated against the effectiveness of any regulatory supervision regime. The first was that the Ethics Council determined that Pemex was too closely connected to the State apparatus and thus operated more as a political rather than an economic instrumentality. The second, and perhaps more important factors was the lack of transparency in its operations--that is that because assessment was difficult, effective regulatory supervision would likely not be realistically feasible. Facilitating an irregular Jewish presence in territories assigned to Palestine did not lend itself to supervision of any sort; treated as a binary (like the production of tobacco products) one either was involved or one was not.
More detailed discussion of the cases (with links) follows below.
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Paz Retail and Energy Ltd
The Council on Ethics recommends that Paz Retail and Energy Ltd (Paz) be excluded from investment by the Norwegian Government Pension Fund Global (GPFG) due to an unacceptable risk that the company is contributing to serious violation of the rights of individuals in situations or war or conflict.
By operating infrastructure for the supply of fuel to the Israeli settlements on the West Bank, Paz is contributing to their perpetuation. The settlements have been established in violation of international law, and their perpetuation constitutes an ongoing violation thereof. The Council therefore considers that Paz is contributing to the violation of international law in such a way as to give grounds for recommending its exclusion from investment by the GPFG.
The Council submitted its recommendation on December 19, 2024.
Norges Bank made public its decision to exclude the company on May 11, 2025.
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Petroleos Mexicanos
The Council on Ethics recommends that the Mexican company Petroleos Mexicanos (Pemex) be excluded from the Norwegian Government Pension Fund Global (GPFG) due to an unacceptable risk that the company is contributing to, or is itself responsible for, gross corruption.
Pemex is a fully integrated oil and gas company. As Pemex is wholly owned by the Mexican state, the Council does not hold shares, but owns fixed-income securities in the company.
The Council on Ethics’ investigations have revealed that Pemex may be linked to multiple allegations or suspicions of corruption in Mexico in the period 2004–2023. The Council attaches importance to the fact that a significant number of company employees, including a former senior executive, are alleged to have received bribes on several separate occasions.
Governance of the company is subject to extensive political influence, which, in the Council’s view, increases the risk that normal control mechanisms may be set aside. In light of this, the Council considers that Pemex has failed to provide sufficient information to demonstrate that financial irregularities are dealt with satisfactorily. Even though Pemex has an anti-corruption system that appears to contain many of the elements required by internationally recognised guidelines, the Council also considers that the company grants too little insight into how this system works in practice.
The Council on Ethics issued its recommendation on 18 November 2024. Norges Bank announced its decision to exclude the company on 11 May 2025.
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Rio Tinto PLC and Rio Tinto Ltd
The Council on Ethics recommends the exclusion of Rio Tinto PLC and Rio Tinto Ltd (Rio Tinto Group) from investment by the Norwegian Government Pension Fund Global (GPFG) due to an unacceptable risk that the company contributes to severe environmental damage.
The Council’s recommendation is based on Rio Tinto’s participation in the joint venture Mineração Rio do Norte (MRN), which operates a bauxite mine in the Amazon rainforest.
MRN operates a bauxite mine in the Saracá-Taquera National Forest in the Brazilian Amazon and is planning to expand the mine with effect from 2026. The expansion of the mine will cover around 100 km2. Approximately 64 km2 will be completely deforested during the project’s lifespan.
The deforestation will contribute to loss and fragmentation of extensive areas of intact tropical rainforest in one of the most important areas for biodiversity globally. The Amazon rainforest is the world’s largest tropical rainforest, housing more than a tenth of global biodiversity. It is likely that a considerable part of the species living there are yet to be discovered and scientifically described.
The Council on Ethics believes that rehabilitation of deforested areas is unlikely to mitigate the environmental damage resulting from the removal of intact rainforest. The Council concludes that the Fund’s investments in companies that contribute to deforestation and degradation of intact rainforest located in part of an ecosystem of crucial importance to the conservation of a significant share of the world’s biodiversity, must be considered to contravene the ethical guidelines.
The Council on Ethics submitted its recommendation November 5, 2024.
On May 11, 2025, Norges Bank announced its decision to follow up on the companies through active ownership.
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South32 Ltd
The Council on Ethics recommends the exclusion of South32 Ltd from investment by the Norwegian Government Pension Fund Global (GPFG) due to an unacceptable risk that the company contributes to severe environmental damage.
The Council’s recommendation is based on South32 Ltd’s participation in the joint venture Mineração Rio do Norte (MRN), which operates a bauxite mine in the Amazon rainforest.
MRN operates a bauxite mine in the Saracá-Taquera National Forest in the Brazilian Amazon and is planning to expand the mine with effect from 2026. The expansion of the mine will cover around 100 km2. Approximately 64 km2 will be completely deforested during the project’s lifespan.
The deforestation will contribute to loss and fragmentation of extensive areas of intact tropical rainforest in one of the most important areas for biodiversity globally. The Amazon rainforest is the world’s largest tropical rainforest, housing more than a tenth of global biodiversity. It is likely that a considerable part of species living there are yet to be discovered and scientifically described.
The Council on Ethics believes that rehabilitation of deforested areas is unlikely to mitigate the environmental damage resulting from the removal of intact rainforest. The Council concludes that the Fund’s investments in companies that contribute to deforestation and degradation of intact rainforest located in part of an ecosystem of crucial importance to the conservation of a significant share of the world’s biodiversity, must be considered to contravene the ethical guidelines.
The Council on Ethics submitted its recommendation November 5, 2024.
On May 11, 2025, Norges Bank announced its decision to follow up on the company through active ownership.
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