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INVESTING/PORTFOLIO STRATEGIES

Norway wealth fund misses out on returns due to divestment, Norges says

Norway’s Government Pension Fund Global’s equity portfolio missed out on 1.1 percentage points of additional gain due to the exclusion of stocks on ethical grounds over the past 11 years, according to Norges Bank Investment Management, which manages the sovereign wealth fund’s assets.

A report by Norges Bank said its benchmark index for equities is based on the FTSE Global All Cap index.

The Oslo-based 7.5 trillion Norwegian kroner ($870 billion) sovereign wealth fund divests companies from its investment portfolio based on two types of exclusions. Product-based exclusions include weapons, thermal coal, and tobacco producers and suppliers. Conduct-based exclusions concern companies with a track record of human rights violations, severe environmental damage and corruption.

The product-based exclusions of tobacco companies and weapon manufacturers reduced the return of the equity portfolio by 1.9 percentage points, the report said.

Divesting from tobacco manufacturers dented the equity portfolio return by 1.16 percentage points in the period between 2006 and 2016, while avoiding weapons makers decreased the return by 0.75 percentage points.

Conduct-based exclusions of mining companies have had a minor effect on the return on the benchmark index, according to the report.

A Norges Bank spokesman was not available to comment.