Norwegian and Dutch pension giants face OECD human rights investigation

Two of the world’s leading responsible investors, Norway’s Norges Bank Investment Management (NBIM) and Dutch civil service pension fund ABP and its fund manager APG, are being investigated over links to alleged human rights violations at Korean steel giant POSCO whose shares they own.

They are being probed under the Organisation for Economic Cooperation and Development’s (OECD) Guidelines for Multinational Enterprises.

Their countries’ OECD ‘national contact points’ are going ahead with an examination following a complaint tabled by a group of four non-governmental organisations last year.

The NGOs – Fair Green Global Alliance, Forum for Environment and Development, Korean Trans National Corporations Watch and Lok Shakti Abhiyan – had filed their complaint in October 2012.

“The Dutch pension fund ABP/APG and Norwegian Government Pension Fund [managed by NBIM] should seek to prevent or mitigate the real and potential adverse impacts directly linked to their operations through their financial relationships with POSCO,” they said.

An initial assessment of the complaint was carried out in November last year.

Now the Norwegian national contact point has announced that it has conferred with its Dutch counterpart over the alleged breaches and “have determined that the issues raised merit further examination”. It follows a 2011 update to the guidelines which the panel says makes it clear that they cover “investments and supply chain issues”.

Pohang, South Korea-based POSCO, which has listings in New York, London and Tokyo as well as Korea, has faced opposition to a $12bn project in India.NBIM, which holds around 0.8% of POSCO, acknowledged receipt of the complaint on November 23.

The examination is now in ‘phase 2’, under which the Norwegian national contact point, chaired by Oslo University’s Hans Petter Graver, has put a total of 31 detailed questions to NBIM.

For instance, NBIM was asked if it had engaged with other investors, for example the International Corporate Governance Network (ICGN), the Council of Institutional Investors or the UN Principles for Responsible Investment (PRI) to reduce the negative impact of human rights of the India project. “If so, with whom, when and in what way?”

“Which procedures are followed by portfolio managers?”

It was also asked if it had conducted any non-financial due diligence as described by the guidelines or discussed the matter with its portfolio managers. “Which procedures are followed by portfolio managers when due diligence findings show high risk of contribution to human rights violations?”

The questionnaire even queries NBIM’s policy of not commenting on individual investments and “invites” it to a meeting to discuss it in more detail.

“How does NBIM, forward looking, see that NBIM may play an active role in bringing better practices at POSCO India?” the Graver panel asks.

For its part, APG had previously stated that it is already in dialogue with POSCO over corporate governance and human rights issues.

Spokespeople for ABP and NBIM didn’t immediately respond to requests for comment. Link to OECD Watch