Norwegian govt fund embroiled in Indonesia illegal logging allegations

Norway’s NOK3.1trn (€391bn) Government Pension Fund has become embroiled in allegations it is profiting from illegal logging in Indonesia.
UK-based non-governmental organization (NGO) the Environmental Investigation Agency has accused the fund of benefiting from its stakes in “scores of plantation and logging companies in Indonesia with scant regard for social, environmental or legal safeguards”.
It cites the example of Malaysia-listed Kuala Lumpur Kepong Berhad (KLK), in which the fund has a stake worth $41.5m. EIA says it has witnessed KLK’s Indonesian palm oil subsidiary PT Menteng Jaya Sawit Perdana illegally razing peat forest in Central Kalimantan’s moratorium zone. EIA documents the activities in a new report entitled Caught REDD Handed.

A spokeswoman for the Norwegian Finance Ministry said it couldn’t comment on specific companies in the fund’s portfolio. But she cited the recent exclusion of Malaysia’s Lingui Developments and Samling Global from the fund over illegal logging.

A central thrust of EIA’s claims is that the fund’s ownership of the firms is at odds with Norway’s role as a major donor to Indonesia under the REDD+ (Reducing Emissions from Deforestation and Forest Degradation) scheme. The Norwegian government said in 2010 that it would support Indonesia’s efforts to cutgreenhouse gas emissions with up to $1bn over up to eight years.
Responding to this, the Finance Ministry spokeswoman pointed out that the fund is a professional investor whose main goal is to ensure that future generations will be able to benefit from Norway’s oil wealth.
She said: “This means that the Fund cannot uphold all the ethical commitments we have as a nation.
“If we used the Fund to go into areas where the Government has other more suitable instruments, for example through its foreign policy or environmental policy, we would risk losing credibility as an investor and in our active ownership.”

“the Fund cannot uphold all the ethical commitments we have as a nation”

The NGO is calling on the Norwegian government to call on the fund’s Ethical Council to investigate KLK’s operations and those of three other groups.
The Finance Ministry wrote to the EIA in August 2010 saying the NGO’s concerns had been “duly noted” by the Ethical Council and the ownership strategies division of Norges Bank Investment Management, the arm of the central bank which runs the fund.