Norway has demonstrated to Australian financial advisers the significance of screening companies for environmental, social and corporate governance (ESG) principles.
The Government Pension Fund of Norway (GPFN), the world’s second-biggest sovereign wealth fund, revealed this week that it had dumped its US$850 million stake in Melbourne-based mining giant Rio Tinto, citing ethical reasons.
GPFN has barred itself from investing in Rio Tinto ever again, adding to the company’s share price slump this week.
GPFN accused Rio Tinto of causing severe environmental damage to a river near the Grasberg Mine in Indonesia.
“The Grasberg mine discharges very large amounts of tailings directly into a natural river system, approximately 230,000 tonnes or more per day,” a Norwegian Government statement said.
Researching ESG principles should be part of a sound risk management process, when planners are selecting stocks and managed funds, according to Innovest Strategic Value Advisors (Innovest).
“That was a lot of money in Rio’s stock that Norwegians have dumped,” Innovest managing director Bill Hartnett said.
“If [advisers] are selecting managed funds, I would be looking at if the manager has signed up to the UN Principles of Responsible Investing and see if they have policies and statements on those key issues,” he said.
Norway used revenue from its oil operations to create the sovereign wealth fund in 1995, which now holds around $450 billion in assets on behalf of 4.7 million residents.
Hartnett added Tasmanian-based company Gunns, has lost 60 per cent of it share price in the last 12 months, due to a lack of support for its pulp mill project.
