Labor Scandal Sparks Probe by Norway Wealth Fund’s Watchdog

Criticism over Qatar’s treatment of workers building stadiums for the soccer World Cup in 2022 has prompted the Norwegian wealth fund’s ethics council to investigate questionable labor practices more broadly.

The $1.3 trillion fund’s ethics council has launched a probe covering a broad geographical area stretching from the Gulf states to the “electronics industry in Malaysia,” according to Johan H. Andresen, who chairs the council overseeing the sovereign wealth fund’s investments.

Labor Scandal Sparks Probe by Norway Wealth Fund’s Watchdog

The investigation, to be carried out by Verité, may lead to recommendations for the fund to divest from companies or pull investments from projects including the soccer competition in Qatar. It all started as a direct consequence of previous findings connected to the World Cup.

When the council looked into companies involved in the service and construction industries in Gulf states, including Qatar, it discovered recruitment practices that put workers in debt in their home countries as they paid for necessary permits, health checks and other expenses.

“When they came to the Gulf, they didn’t get paid what they were promised,” Andresen said in a phone interview. The fund was made aware of workers being deprived of their passports, subjected to very poor living conditions, and unable to change employers or return home because of the debt they had amassed.

These are “recruitment practices that put very vulnerable people in a forced situation,” Andresen said. “We found that this is not just limited to the Gulf area, this is all over Asia in the emerging economies.”

The ethics panel previously advised exiting security company G4S Plc because of the recruitment practices at one of its franchises in the Gulf.

Qatar, beset by criticism since winning the bid to host the competition in 2010, has taken steps to improve worker conditions. It announced new labor-market reforms last year, including rules allowing workers to take new jobs without their current employers’ approval, imposing a minimum wage and beefing up labor protections.

The council’s probe will cover multiple markets and industries, and could gobble up more than a quarter of the watchdog’s budget. With stakes in more than 9,000 companies globally, or about 1.5% of all listed companies globally, the fund is the biggest of its kind and has some sway over corporate practices.

”We will see the results of this for the next five to 10 years,” Andresen said. “It’s an investment in many ways.”

If the findings are grave, the watchdog can recommend putting a company the fund is invested in under observation, or to exclude it from the portfolio.

“We want to follow people more than the products,” Andresen said. “Where are the migrants going, who are they working for, and are there norm violations there?”

He said the best remedy is to demand that companies pay for recruitment costs to avoid saddling the workers with debt.

“We know there are companies that pay,” he said. “This is entirely possible to do something about.”

©2021 Bloomberg L.P.

BQ Install

Bloomberg Quint

Add BloombergQuint App to Home screen.