We may be on the brink of a real breakthrough in responsible investing thanks to a new policy on human rights adopted by Norway’s sovereign wealth fund.

Since 2013, a substantial segment of the palm oil industry and the buyers of their product have adopted strong forest conservation policies, often described as “No deforestation, no peat, no exploitation”.

West Papuan women left isolated and beset by violence under Indonesian rule | Rochelle Jones Read more

NGO campaigns and consumer reactions have built up the pressure. But when the world’s largest sovereign wealth fund, the Norwegian Government Pension Fund Global (GPFG), withdrew its investment in 23 palm oil companies in 2012, the news sent shockwaves through the industry.

The decision also meant the fund’s policy on climate change would target tropical deforestation as a priority issue.

Norges Bank Investment Management (NBIM), manager of the wealth fund, has since introduced a human rights policy called “Human rights – expectations towards companies”. It says all companies in which the GPFG invests are expected to respect human rights, integrate a human rights strategy into their operations and risk management, and report on their performance in a comprehensive and accessible manner.

These words send a loud and clear signal – and the financial clout behind them will ensure they do not fall on deaf ears.

Facebook Twitter Pinterest A forest activist inspects land clearing and drainage of peat natural forest in Riau province, Sumatra. Photograph: Ulet Ifansasti/Getty Images

Managing investments in roughly 9,000 companies in 75 countries, the size and reach of the $830bn (£570bn) fund ensure that its practices and performance are closely monitored the world over. As such, NBIM is in a unique position to induce positive behaviour changes in companies and lead other investors by example.

Given NBIM’s demonstrated willingness to take action should international companies fail to live up to expectations, the new human rights stipulations could be a game changer in getting the private sector to respect the rights of indigenous people and communities. Investments in natural resources often lead to human rights violations, and indigenous people and forest communities are especially vulnerable. Forest people in Indonesia have watched with resignation as their customary lands were cleared for palm oil plantations, in contravention not only of their land rights but also of a 2013 ruling by Indonesia’s constitutional court. In future, though, they may have a powerful new ally, if industry responds to this strong incentive for partnering with local communities.

Has NBIM become a political actor? It says not. Instructed by the Norwegian parliament to build wealth for future generations, NBIM is an investor with a horizon of 50-100 years. And to NBIM, long-term financial sustainability depends on social and environmental sustainability.

Rainforest Foundation Norway and other NGOs have repeatedly exposed NBIM for undermining Norway’s large-scale support for rainforest protection. In response, NBIM has publicly declared that it finds palm oil companies’ massive contribution to deforestation and climate change unacceptable. For a long-term diversified investor, it simply doesn’t make sense to allow companies to externalise environmental costs, thereby threatening to increase the volatility of stock prices.



Sami reindeer herders battle conservationists and miners to cling on to Arctic culture Read more

The fund manager reached a similar conclusion when it analysed the projected impact of human rights violations. In decreeing that investee companies should “conduct ongoing human rights due diligence, based on the perspectives of those who may be negatively impacted … in relation to all aspects of a business operation”, the new policy may sound like the demands of an NGO. But NBIM is simply making clear what it expects, in order to secure its own earnings.

The GPFG’s increasingly rigorous expectations are the result of substantial public and political attention focused on the consequences of its investments.

The Norwegian public demands ethical consistency as well as financial returns. Although still far from fully implemented in practice, the fund’s policies on human rights and climate change set a standard that ought to be followed and further developed by other financial investors. Investors are responsible for the consequences of their investments. And they have power.

Like the Norwegian Government Pension Fund Global, they should link financial sustainability to social and environmental sustainability, paving the way for increasing gains on a triple bottom line of people, planet and profit.

