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Feb 06, 2014

World’s largest SWF drops Israeli firms over settlement building

Norwegian sovereign wealth fund is latest to divest over settlement concerns

Norway’s finance ministry has banned the country’s $810 bn Government Pension Fund Global from investing in two Israeli companies over concerns they are involved in building settlements in the occupied territories.

Africa Israel Investments (AII) and subsidiary Danya Cebus, which is 82 percent owned by AII, have been blacklisted by the ministry over ‘serious violations of individual rights in war or conflict through the construction of settlements in East Jerusalem’. However, a spokesperson from Norway’s finance ministry tells IR Magazine that ‘the fund was not invested in the companies at the time of the exclusion’.

The move follows a recommendation by the oil-rich nation’s council on ethics in September 2013, based on ‘information that [Danya Cebus] is constructing settlements in East Jerusalem,’ an activity that ‘must be regarded as illegal’.

AII and its subsidiaries had originally been excluded from the fund between August 2010 and August 2013. This ban was lifted for a short time after the council on ethics says it was assured the firm had no plans to construct settlements in the West Bank, widely regarded as illegal under the Fourth Geneva Convention, which bars occupying powers from transferring part of their own civilian population into the territories they occupy. AII did not respond to requests for comment.

Israeli property group Shikun & Binui was blacklisted by the ministry on the same grounds in 2012.

This is the latest in a series of high profile moves against Israeli firms with links to settlements. At the end of January, actress Scarlett Johansson broke ties with Oxfam International after it criticized her promotion of Israeli carbonized drinks firm SodaStream, which operates a factory in the Ma’ale Adumim settlement near Jerusalem.

Also in January, PGGM, the second-largest Dutch pension fund, ditched its holdings in five Israeli banks over ‘their involvement in financing Israeli settlements in the occupied Palestinian territories’. The fund states that it had been in dialogue with these banks – namely Bank Hapoalim, Bank Leumi, First International Bank of Israel, Israel Discount Bank and Bank Mizrahi-Tefahot – ‘for several years’.

‘The dialogue showed however that, given the day-to-day reality and domestic legal framework they operate in, the banks have limited to no possibilities to end their involvement in the financing of settlements in the occupied Palestinian territories. Therefore, it was concluded that engagement as a tool to bring about change will not be effective in this case,’ said PGGM in a statement.

Other large investors, including Scandinavian fund Nordea Investment Management and DNB Asset Management, a €60 bn ($81.5 bn) Norwegian fund group, are reportedly also reviewing their holdings in Israeli banks.

ABP, the world’s third-largest pension fund, which had reportedly also been in discussions with Israeli banks, has since clarified its position. ‘Currently, ABP invests in three Israeli banks,’ it says in a press statement. Following discussions with these banks, ‘ABP has concluded that these banks themselves do not act in breach of international laws and regulations, and that there are no judicial rulings that should lead to their exclusion.’

Alongside AII and Danya Cebus, the Norwegian finance ministry has also banned the fund from investments in Sesa Sterlite, a newly formed subsidiary of London-listed mining company Vedanta, which itself and two other subsidiaries have been blacklisted since 2007. The council says Vedanta’s operations in India, which currently run through Sesa Sterlite, ‘present an unacceptable risk of environmental damage and serious violations of human rights’.

The Norwegian finance ministry has also blacklisted the government bonds of North Korea, Syria and Iran, though none are offered at present. The government bond exemption, which had previously applied only to bonds issued by Myanmar, has now been lifted for that country.

Garnet Roach

Garnet Roach joined IR Magazine in October 2012, working on both the editorial and research sides of the publication. Prior to entering the world of investor relations, her freelance career covered a broad range of subjects, from technology to...

Senior reporter