OECD contact in Norway will not take on Norges Bank over human rights violation linked to POSCO investment

NBIM says it is engaging on Uzbek child labour issue.

The OECD’s National Contact Point (NCP) in Norway has declined to follow up on a complaint filed by three NGOs against Norges Bank Investment Management (NBIM) regarding human rights violations that one of its investee companies, South Korean steel firm POSCO, is alleged to be involved with.
NBIM is the manager of Norway’s NOK7.18trn (€804bn) Global Pension Fund Global (GPFG), which has a minority stake (0.9%) in POSCO. Last month, RI reported that the NGOs: Cotton Campaign, Anti-Slavery International and KTNC had filed a complaint with Norway’s NCP under the OECD Multinational Guidelines process to get NBIM to divest POSCO and its subsidiary Daewoo International.
The reason for the complaint: the NGOs allege that Daewoo, a textile supplier, sources cotton in Uzbekistan that is harvested with the help of forced and child labour. They say that while they have engaged with Daewoo and POSCO to stop this, the companies refuse to acknowledge that there is even a serious problem. The NGOs have called out NBIM on the matter by turning to the NCP in Norway. According to them, the investment in POSCO contradicts NBIM’s stated policy of excluding companies that rely on child and forced labour.
The issue of application of the so-called ‘soft law’ OECD Multinational Guidelines to minority shareholders has become a political hot potato.
The Norwegian NCP says it will not pursue the matter, in part because it isn’t clear that NBIM is not complying with OECD guidelines. Norwegian NCP Chair, Ola Mestad, told RI: “The complaint raises questions about what type of due diligence can be expected of aminority shareholder (i.e. the GPFG) and questions of principle concerning application of the OECD Guidelines in relation to financial institutions. A process is ongoing in the OECD to specify expectations of the financial sector, including of minority shareholders.”
The NGOs criticised the NCP’s decision, saying it was wrong for the OECD body to not address the merits of the Daewoo case. They cited the example of Kommunal Landspensjonskasse (KLP) the Norwegian pension insurer, which has divested from POSCO because of the alleged human rights violations in Uzbekistan.
Professor John Ruggie, a Harvard professor and one of the world’s leading political scientists, whose so-called ‘Ruggie Principles’ form the basis of the OECD Guidelines, told RI in a recent interview that the guidelines ‘do’ apply to minority shareholders. If correct, this would de facto oblige NBIM to deal with the allegations surrounding POSCO/Daewoo.
NBIM told Responsible Investor that, as per its guidelines, it expected investee companies to protect children’s rights in its supply chains and eschew forced labour. Regarding POSCO in particular, a spokeswoman said her firm was aware of the allegations and had raised the issue with the company’s board. She did not disclose any further detail, saying the discussions were private. The NBIM spokeswoman said that should the allegations surrounding Daewoo prove true, POSCO could be put under observation and ultimately be excluded. In deciding such exclusions, NBIM is advised by its Council of Ethics.