Norway Excludes Schweitzer-Maudit and Huabao From Wealth Fund

Norway’s sovereign-wealth fund, the world’s largest, excluded Schweitzer-Mauduit International Inc. and Huabao International Holdings Ltd. from its portfolio because of their involvement in tobacco production.

The $740 billion Government Pension Fund Global sold its shares in both companies because they produce reconstituted tobacco leaf, or RTL, the Finance Ministry said in a statement today. The ministry, which sets the investment guidelines for the Oslo-based fund, excluded the groups based on the recommendation of the Council of Ethics.

“The council underlines that RTL primarily is made from the tobacco plant and therefore must be regarded as a tobacco product,” the ministry said. “The two companies concerned state in their annual reports and investor presentations that they produce RTL.”

RTL is made from remnants, dust and other by-products of the processing of tobacco leaves and from parts of the tobacco plant that can’t otherwise be used, according to the ministry. RTL can constitute as much as 15 percent of the tobacco content of cigarettes, the ministry said.

Alpharetta, Georgia-based Schweitzer-Mauduit supplies about 80 percent of the U.S. market for so-called low-ignition proclivity papers, which have thick bands that act as buffers so a cigarette goes out if a smoker isn’t drawing air through it.

China’s Huabao International, among other things produces and sells tobacco flavors, according to its website.

The fund, which is Europe’s largest equity investor, takes into account ethical rules encompassing human rights, some weapons production, the environment and tobacco when deciding on investments. It has excluded more than 50 companies following recommendations from the Ethics Council. The exclusions are announced after the shares are sold.

At the end last year, Norway’s wealth fund held shares valued at about 165 million kroner ($28.3 million) in Huabao International and about 50 million kroner in Schweitzer-Mauduit, according to the fund’s website.