Money Laundering Is on the Radar for Norway's $1 Trillion Fund

(Bloomberg) -- Norway’s $1 trillion wealth fund is cracking down on corruption risks and suggested that money laundering is one of the dangers it monitors in its portfolio.

The fund sold out of 30 companies last year as part of its risk-based divestment regime, on top of the 13 it publicly excluded based on ethical criteria. The divestments are undisclosed and done on a precautionary basis to guard against unwanted events because there’s not enough information available.

“We don’t disclose these because it’s risk based,” Yngve Slyngstad, chief executive officer of the fund, said in an interview Thursday. “We don’t know the underlying conditions. Corruption is an area where we don’t know, therefore we take precautions.”

He said money laundering “could be one of the themes we look at,” declining to comment further.

Money Laundering Is on the Radar for Norway's $1 Trillion Fund

Precautions at the fund comes as money laundering allegations have swirled around some of the largest lenders in the Nordic region and Europe. Danske Bank A/S has said that a large part of $230 billion that flowed through a tiny Estonian outpost may have been dirty.

Risk Based

Norway’s fund added nine companies to its risk-based divestment on corruption grounds last year, taking the total number to 22. In total, the fund has excluded 240 companies using its risk-based assessments.

The fund also increased its votes against executive pay packages last year, and said it engaged with companies in the auto sector on risks from the use of cobalt and held close to 1,500 “dialogues” with companies last year. It voted against 7.2 percent of resolutions on executive remuneration, up from 6.9 percent in 2017.

The fund met with 14 companies in the auto sector, including BMW AG, Toyota Motor Corp. and Volkswagen AG, discuss human rights concerns related to cobalt use.

“Some new issues are emerging from the transition to a low carbon economy,” said Carine Smith Ihenacho, the fund’s chief corporate governance officer. “We contacted companies to understand their low-emissions plans and how they are managing the risk of human rights violations in their supply chain.”

Bank Meetings

The fund met with 24 “global banks” to look over their climate disclosures and to see if they’re equipped for the “transition to a low-carbon economy” and talked to banks in Malaysia, Indonesia and Latin America about lending policies and deforestation.

It voted at 11,287 shareholder meetings last year. It had 56.7 billion kroner earmarked for environmental investments, which lost 8.3 percent in the year.

Norway’s fund is becoming increasingly activist in its approach to investing, with a particular focus on corporate governance issues and voting. It has attacked excessive CEO pay and refuses to invest in companies that fail to live up to its environmental and ethical standards.

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