Norway’s $875 billion sovereign wealth excluded Daewoo International Corp. and Posco from its investments because of their involvement in palm oil production.
“There’s an unacceptable risk that Daewoo, and thus also its parent company POSCO, may be responsible for severe environmental damage in connection with the conversion of tropical forest into oil palm plantations in Indonesia,” Norway’s Ethics Council, which advises the investor, said Monday in a report published on its website.
The Oslo-based fund also will not invest in IJM Corp. Bhd and Genting Bhd, due to “risk of severe environmental damage,” it said in a statement. The two Malaysian companies also have palm oil operations.
The fund takes into account ethical rules encompassing human rights, some weapons production, the environment and tobacco. It has excluded more than 60 companies following recommendations from the Ethics Council.
“The severity and relevance of breaches aren’t reduced by” the fact that palm oil production comprises only a small portion of Daewoo’s operations, the council said.
South Korean steel producer Posco owns 60 percent of Daewoo, which has an 85 percent share of an Indonesian plantation company through which it is converting forests to palm oil plantations, according to the report. At the end of 2014, the fund held $9 million in Daewoo stocks and $224.4 million in POSCO stocks and bonds, according to its website.
The fund held $46 million in IJM and $40.8 million in Genting, according to the fund’s website. The investor typically sells its investments before an exclusion announcement is made.
Officials at the South Korean and Malaysian companies couldn’t immediately be reached or weren’t immediately able to comment after the close of regular business hours.