The manager of the world’s largest sovereign wealth fund wants Norway’s Ministry of Finance to end a freeze on the fund’s investments in Russia, allowing it to divest its holdings.
Norges Bank Investment Management, the in-house manager of the 19.78 trillion Norwegian kroner ($1.78 trillion) Government Pension Fund Global, Oslo, sent the letter to the ministry on Aug. 25. However, the letter, signed by CEO Nicolai Tangen and Governor of the central bank Norges Bank Ida Wolden Bache, was not published until Dec. 4.
NBIM said GPFG’s Russian equity portfolio was valued at an estimated 1.5 billion kroner as of end-June, and it had an additional about 3.2 billion kroner held in Russian rubles in its custodian Citibank’s account with the Russian National Settlement Depository. That holding consists of dividends received since February 2022, when the ministry froze all of the fund’s investments in financial instruments issued by Russian companies, the Russian state or entities linked to the Russian state.
The decision was made following the invasion of Ukraine, at which point the ministry also decided to exclude Russia from the fund’s investment universe. In a 2022 letter, the ministry asked NBIM to prepare a draft plan to sell off GPFG’s Russia holdings. NBIM responded that it would send a recommendation on lifting the freeze on assets and a divestment plan once market conditions had normalized enough to proceed, but the November 2023 update by Norges Bank noted “the ever-widening regime of sanctions against Russia” and countermeasures, which meant it was “still unable to propose a general divestment plan.”
It asked for authorization to sell a few securities that had been identified as possible to divest under the sanctions regime, and also said it would “monitor market conditions and the equities in the portfolio,” and propose a plan for complete divestment if conditions changed.
However, further escalation of sanctions and countermeasures has meant “it is still not possible to draw up a general plan for the divestment of our Russian portfolio,” and the fund is only able to complete “isolated transitions if and when divestment opportunities arise,” the letter said.
“Norges Bank therefore requests the Ministry’s authorization to make such divestments where this is possible under applicable sanctions rules. Such an approach to seizing divestment opportunities would mean an end to the general freeze on the fund’s investments in Russia,” the letter said.
Tangen and Wolden Bache also stressed that “opportunities to sell Russian securities are currently very limited. Any sales of securities by Norges Bank will need to comply with applicable sanctions, including requirements for the buyers of the securities. We will also need to take account of the fund’s interests more generally. We will keep the ministry informed of changes to the portfolio, and if market conditions change significantly with the result that Norges Bank can again consider a more general divestment plan,” the letter concluded.
On Dec. 3, NBIM’s executive board decided to exclude mining company Evraz, a U.K. company with operations in Russia, “due to an unacceptable risk that the company contributes to serious violations of fundamental ethical norms,” a statement said. “Following Russia’s invasion of Ukraine in February 2022, the Ministry of Finance decided that the Government Pension Fund Global was to exit Russia. Evraz PLC is among the companies that were to be sold. However, due to sanctions and operational issues, the fund has not yet been able to sell this company.”
The council’s assessment said: “The council's inquiries have shown that Evraz PLC may be linked to the Russian defense industry as a supplier of steel which enables Russia to continue its unlawful war of aggression against Ukraine.”
The fund had a 15 million kroner holding in Evraz as of June 30, according to its website.
NBIM’s board also, on the recommendation of its Council on Ethics, decided to exclude Bezeq The Israeli Telecommunication Corp Ltd, “due to an unacceptable risk that the company contributes to serious violations of the rights of individuals in situations of war and conflict.” Its holding was 252 million kroner as of June 30.
