Norges Bank says challenge to OECD on shareholdings/human rights will be answered in Q3

Investor awaits follow up to OECD letter rebutting shareholder implication in Multinational Guidelines.

Norges Bank Investment Management (NBIM), which manages the money of the NOK4.4trn (€556bn) Government Pension Fund of Norway, one of the world’s largest sovereign wealth funds (SWFs), says it expects a response in the third quarter of this year on the controversial issue of whether minority shareholders should bear some responsibility under the OECD’s Multinational Guidelines for human or labour rights abuses at companies they invest in. The issue is being watched carefully by institutional investors in the 34 member countries of the OECD. The reason is that it could implicate them directly in investigations being carried out by the respective government National Contact Points (NCPs) that are charged with investigating complaints via the OECD Multinational Guidelines grievance mechanism that allows NGOs and other civil society organisations to report alleged abuses by multinational companies in foreign jurisdictions. This is already happening with NBIM and APG, the Dutch pension fund manager, which have been drawn into a de-facto test case on the minority shareholder issue based on their investment in POSCO, the South Korean steelmaker, which is involved in controversial plans to build a plant in Odisha, India. Four NGOs – Lok Shakti Abhigan, KTNC Watch, Fair Green and Global Alliance and Forum for Environment and Development – claim the $12bn site would lead to the displacement of around 22,000 people. They pursued their claims – and called for a response from NBIM and APG as shareholders – via the OECD grievance mechanism, a case that was then picked up by three NCPs. The grievance procedure has no legally binding status, but it is seen as an obligation for OECD states to follow up on based on their signing of the OECD charter. Speaking at the OECD Global Forum on Responsible Business Conduct in Paris on Friday last week (June 27), William Ambrose, Global Head ofBusiness Risk at NBIM, said: “We have sent a letter to the OECD for clarification and have been told that the response is in the pipeline, likely for Q3, but that for the moment it is better not to comment on this.”
RI reported that NBIM originally sent a letter in May 2013 to the OECD, which firmly rebutted the attempt to hold shareholders to account in such investigations. Ambrose explained NBIM’s position: “In principle, we believe the company board is responsible for these issues and it is important that the right people are held to account.” He suggested that the case has become an interpretation struggle between the OECD’s Principles of Corporate Governance and its Guidelines on Multinational Enterprises: “The OECD Principles of Corporate Governance are explicit that the board is the entity that speaks on behalf of the company. We believe there needs to be some clarity between what is said there and what is being said in the Multinational Guidelines.”
Campaigners and lawyers argue that the OECD Guidelines, which were updated in 2011 to add a new chapter on human rights aligned with the more detailed UN Guiding Principles on Business and Human Rights, are clear on the responsibilities of the financial sector: Link to related RI article
Speaking on the same panel, Philip Jennings, General Secretary of the UNI Global Union, said: “The attempt by the Norwegian Government Pension Fund to avoid the responsibility issue of minority shareholdings has been covered and I would appeal to the fund to think again about the constructive role of the OECD guidelines. To ignore the NCP in Norway as NBIM has done sends out the worst example possible. I hope that NBIM will take a step back and learn from this.”
APG decided to take a different tack from NBIM by agreeing to engage with POSCO on the issue, as reported by RI.