The Ministry of Finance has established guidelines for the observation and exclusion of companies from the Government Pension Fund Global. Section 5 details the work of the Council. Fifth subsection states:

“The Council shall regularly assess whether the basis for observation or exclusion still exists. In light of new information, the Council may recommend that the Bank revokes an observation or exclusion decision”

Further, seventh subsection states:

“The Council shall publish its routines for the consideration of possible revocation of an observation or exclusion decision. Excluded companies shall be informed specifically of these routines.”

In accordance with the guidelines, Norges Bank has expressed its expectations to the Council’s selection of companies in its letter to the Council dated March 20, 2015. For excluded companies or companies placed under observation, Norges Bank expects the Council to report annually on whether or not the grounds for exclusion or observation are still present. Norges Bank may also ask to Council to reassess already excluded companies.

A company is not excluded for a specific period of time, but may return to the investment universe as soon as the grounds for exclusion cease to exist. If the grounds for exclusion no longer apply, the Council on Ethics submits a recommendation to the Norges Bank to revoke the exclusion of the company.

Excluded companies are encouraged to inform the Council of matters that may cause their exclusion to be revoked, using the following e-mail address:

Companies may be excluded on the grounds of both what they produce and how they conduct their operations. The procedure for reassessing companies differs, depending on whether the exclusion is product-based or conduct-based, as it is easier to establish whether a company produces a particular product than whether its operations are in breach of the criteria for business conduct.

In some cases the assessment of companies that have been excluded on the grounds of their conduct may be simple, whereas in other cases it requires extensive analysis. Some companies are excluded due to a single serious violation, while others are excluded on the grounds of several factors which together indicate that the company’s practices are in systematic contravention of the Guidelines. Companies may also be excluded on the basis of one or several violations, while at the same time maintaining other operations which have not previously been considered by the Council on Ethics but which are nevertheless contrary to the Guidelines.

Product-based exclusion

  • Excluded companies are monitored continuously. An independent consultant submits quarterly reports to the Council regarding companies that produce tobacco, weapons covered by the Guidelines, or military material which they sell to the governments of specific states (currently North Korea, and Syria).
    • If the information from the consultant or other data indicates that excluded companies no longer engage in such production, the Council on Ethics will contact the company.
    • The Council on Ethics also seeks to have the information confirmed by other sources.
    • If the production has ceased, the Council on Ethics will submit a recommendation to revoke the exclusion.

Conduct-based exclusion

  • The Council on Ethics annually reassess excluded companies to see whether there are indications of any significant changes in their operations, for example whether companies still have a controlling interest in the activities that led to exclusion, or whether such activities are still ongoing. If the violation that caused the company’s exclusion has ceased to exist, for instance through the sale of the operation, the Council on Ethics will examine whether there are other reasons to maintain the exclusion. If other grounds for exclusion do not seem to apply, the Council on Ethics will present a recommendation to revoke the exclusion.
  • If the annual reassessment indicates other operational changes which may suggest that the grounds for exclusion no longer apply, the Council on Ethics will further examine the violations that the exclusion is based on, obtaining information from the company and from other sources as well as possibly carrying out its own studies.

The Council also considers if there may be grounds for further exclusion of a company other than the initial grounds. Continued exclusion may therefore be based on other, similar circumstances than those which formed the basis for the original exclusion.

In the event that the company has implemented measures that have led to sufficient improvements to the conditions on which the exclusion is based, and if there are no other grounds for exclusion, the Council on Ethics will present a recommendation to revoke the exclusion. The improvements must be observable in practice, not only in corporate strategies or plans.

If the reassessment shows that there are still grounds for exclusion, the company’s exclusion from the Fund will be maintained. A company that has given the Council on Ethics information will, once the process is over, be informed of why it is still excluded from the Fund.

If Norges Bank requests a new evaluation of a specific company, the Council will submit a recommendation regarding this company, even if it cannot recommend to revoke the exclusion.

For companies that have been placed under observation based on a recommendation from the Council, the Council normally provides Norges Bank with an annual assessment of each company. The Council obtains information from open sources, but can also commission its own investigations. A draft of the report is sent to the company concerned for comment, and meetings with companies are often held.

The observation of a company may be ended at any time through a recommendation to discontinue observation or  to exclude the company.