The Government Pension Fund of Norway
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The Government Pension Fund of Norway comprises two entirely separate sovereign wealth funds owned by the Government of Norway:
- The Government Pension Fund - Global (formerly The Government Petroleum Fund)
- The Government Pension Fund - Norway (formerly The National Insurance Scheme Fund)
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[edit] The Government Pension Fund - Global
The Government Pension Fund - Global (Norwegian: Statens pensjonsfond - Utland) is a fund where the surplus wealth produced by Norwegian petroleum income is put. The fund changed name in January 2006 from its previous name The Petroleum Fund of Norway. The fund is commonly referred to as The Petroleum Fund (Norwegian: Oljefondet). As of the valuation in June 2007, it is the largest pension fund in Europe and the second largest in the world [1] with a value of NOK 1.939 trillion, although it is not actually a pension fund as it derives its financial backing from oil profits and not pensions.
The purpose of the petroleum fund is to invest parts of the large surplus generated by the Norwegian petroleum sector, generated mainly from taxes of companies, but also payment for license to explore as well as the State's Direct Financial Interest and dividends from partly state-owned StatoilHydro. It is predicted that revenue from the petroleum sector is now in its peak period and will decline over the next decades. The Petroleum Fund was established in 1990 after a decision by the legislature assembly Storting to counter the effects of the forthcoming decline in income and to smooth out the disrupting effects of highly fluctuating oil prices.
The fund is administered by Norges Bank Investment Management (NBIM), a part of the Norwegian Central Bank. It is currently the largest pension fund in Europe and similar in size to the California public-employees pension fund (CalPERS), the largest public pension fund in the United States. NBIM forecasts that the fund will reach NOK 3.044 trillion by the end of 2009. Since 1998 the fund has been allowed to invest up to 50% of its portfolio in the international stock market.
[edit] Debate
Due to the large size of the fund relative to the low number of people living in Norway (4.7 million people in 2006), the Petroleum Fund has become a hot political issue, dominated by three main issues.
- Whether the country should use more of the petroleum revenues on the state budget instead of saving the funds until later. The main matter of debate is to what degree increased government spending will increase inflation.
- Whether the high exposure (around 40% in 2003) to the highly volatile, and therefore risky, stock market is financially safe. Others claim that the high differentiation and extreme long term of the investments will dilute the risk and that the state is losing considerable amounts of money due to the low investment percentage in the stock market.
- Whether the investment policy of the Petroleum Fund is ethical.
[edit] The Ethical Council
Part of the investment policy debate is related to the discovery of several cases of investment by The Petroleum Fund in highly controversial companies, involved in businesses such as arms production and tobacco. The Petroleum Fund’s Advisory Council on Ethics was established November 19, 2004 by royal decree. Accordingly, the Ministry of Finance issued a new regulation on the management of the Government Petroleum Fund which also includes ethical guidelines.
[edit] Excluded companies
The following companies have been excluded from the Government Pension Fund of Norway due to activities in breach of the Ethical Guidelines [2]
| Company | HQ | Date of exclusion | Reason |
|---|---|---|---|
| Alliant Techsystems Inc |  United States |
June 30, 2005 | Production of components to cluster munitions[3]. |
| BAE Systems Plc. |  United Kingdom |
October 11, 2005 | Production of nuclear missiles to the French Air Force through the company MBDA[4]. |
| Boeing Company | United States |
October 11, 2005 | Maintenance of ICBMs to the U.S. Air Force[4]. |
| DRD Gold Limited |  South Africa |
January 29, 2007 | Serious environmental damage[5]. |
| European Aeronautic Defence and Space Company EADS N.V. |  France/ Germany/ Netherlands |
June 30, 2005 | Production of components to cluster munitions[3]. |
| GenCorp Inc | United States |
November 15, 2007 | Production of nuclear weapons[6]. |
| General Dynamics Corporation | United States |
June 30, 2005 | Production of components to cluster munitions[3]. |
| Hanwha Corporation |  South Korea |
May 15, 2007 | Production of cluster munitions[6]. |
| Honeywell International Inc. | United States |
October 11, 2005 | Simulations of nuclear explosions[4]. |
| L3 Communications Holdings Inc | United States |
June 30, 2005 | Production of components to cluster munitions[3]. |
| Lockheed Martin Corp | United States |
June 30, 2005 | Production of components to cluster munitions[3]. |
| Northrop Grumman Corp. | United States |
October 11, 2005 | Maintenance of ICBMs to the U.S. Air Force[4]. |
| Poongsan Corporation | South Korea |
September 30, 2006 | Production of cluster munition [7]. |
| Raytheon Company | United States |
June 30, 2005 | Production of components to cluster munitions[3]. |
| SAFRAN SA | France |
October 11, 2005 | Production of nuclear missiles to the French Navy[4]. |
| Serco Group Plc | United Kingdom |
November 15, 2007 | Maintenance of British nuclear weapons through the Atomic Weapons Establishment[6]. |
| Singapore Technologies Engineering | United States |
March 22, 2002 | Production of anti-personnel landmines[8]. |
| Thales SA | France |
June 30, 2005 | Production of components to cluster munitions[3]. |
| United Technologies Corp. | United States |
October 11, 2005 | Production of engines to ICBMs in the U.S. Air Force[4]. |
| Vedanta Resources Plc | United Kingdom |
August 28, 2007 | Environmental and human rights abuses[9]. |
| Wal-Mart Stores Inc. | United States |
March 28, 2006 | Breach of human rights and labour rights [10]. |
The Government Pension Fund - Global excluded Kerr-McGee Corporation on April 29, 2005 for conducting petroleum surveying in occupied Western Sahara[11]. This position was reversed on June 30, 2006, after Kerr-McGee had concluded its involvement in Western Sahara[12].
[edit] The Government Pension Fund - Norway
The Government Pension Fund - Norway (Norwegian: Statens pensjonsfond - Norge) was established by the National Insurance Act (Folketrygdloven) in 1967 under the name National Insurance Scheme Fund (Norwegian: Folketrygdfondet). The name was changed at the same time as the former Petroleum Fund on January 1, 2006. This fund continues to be managed by a separate board and separate government entity still named Folketrygdfondet. The Government Pension Fund - Norway had a value of NOK 106.9 billion at the end of 2006. Unlike the Global division, it is instructed to invest in domestic companies on the stock market, dominantly on Oslo Stock Exchange. Due to this, the Government Pension Fund - Norway is a key stock owner in many large Norwegian companies.
[edit] References
- ^ Pension Funds Online. Statistics.
- ^ Norges Bank. NBIM Annual Report 2007.
- ^ a b c d e f g Norwegian Ministry of Finance (2005-09-02). Åtte nye selskaper utelukket fra Petroleumsfondet (Norwegian).
- ^ a b c d e f Norwegian Ministry of Finance (2006-01-05). Uttrekk av selskaper fra Statens pensjonsfond - Utland (Norwegian).
- ^ Norwegian Ministry of Finance (2007-04-11). Gruveselskap utelukkes fra Statens pensjonsfond - Utland på grunn av medvirkning til alvorlig miljøskade (Norwegian).
- ^ a b c Norwegian Ministry of Finance (2008-01-11). En klasevåpenprodusent og to kjernevåpenprodusenter utelukket fra Statens pensjonsfond - Utland (Norwegian).
- ^ Norwegian Ministry of Finance (2006-12-06). Sørkoreansk klasevåpenprodusent utelukket fra Statens pensjonsfond - Utland (Norwegian).
- ^ Norwegian Ministry of Finance (2002-03-22). Petroleumfondets Folkerettsråd - Notat til Finansdepartementet (Norwegian).
- ^ Norwegian Ministry of Finance (2007-11-06). Metall- og gruveselskap utelukkes fra Statens pensjonsfond – Utland (Norwegian).
- ^ Norwegian Ministry of Finance (2006-06-06). To selskaper - Wal-Mart og Freeport - trekkes ut av Statens pensjonsfond - Utland (Norwegian).
- ^ Norwegian Ministry of Finance (2005-06-06). Første selskap utelukket fra Petroleumsfondet (Norwegian).
- ^ Norwegian Ministry of Finance (2006-09-01). KerrMcGee Corporation tas inn igjen i Statens pensjonsfond - Utland (Norwegian).
