NBIM to exclude PowerChina and place Petrofac under observation

Pension giant announces decision on stocks

NBIM to exclude PowerChina and place Petrofac under observation

Norway’s sovereign wealth fund, Norges Bank Investment Management (NBIM) has announced its decision to exclude Chinese hydroelectric company Power Construction Corp. of China Ltd., known as PowerChina, from its NOK 14 trillion (€1.28trn) portfolio due to concerns over the damage risks on the location of the project, Batang Toru, which also inhabits one of world’s most endangered orangutan species.

The Council on Ethics of the Government Pension Fund Global (GPFG) made the recommendation to Norges Bank on the exclusion, stating Sinohydro Corp, a subsidiary of PowerChina, was responsible for the construction and operation of the hydropower project in Batang Toru in North Sumatra, Indonesia. Batang Toru Ecosystem is the home to the last survivors of the Tapanuli orangutan species, which is now considered to be critically endangered species with almost 800 remaining in population.

“The Tapanuli orangutan is the most endangered of all the great apes,” the panel said in a statement.

“The Council concludes that the construction of the hydropower project in Batang Toru will have a destructive and permanent impact on the environment, which will pose a serious threat to the survival of this orangutan species as well as other critically endangered species.”

NBIM has also decided to place UK-based oil-and-gas infrastructure firm Petrofac Ltd. under observation over risks of corruption and allegations of bribery or other serious crimes. The Council of Ethics noted the former Petrofac executive pled guilty to 14 counts of bribery to win contracts amounting to more than $8 billion.

Norges Bank acknowledged the statement of a UK judge on Petrofac improving its compliance organization as well as its due diligence processes and replacing its board and management. However, the council has recommended placing Petrofac under observation as "Petrofac’s new compliance organization was also put in place not long ago, making it difficult to fully assess the impact of the company’s anti-corruption measures.”

In a statement, Petrofac’s spokesperson said, “The [Serious Fraud Office]’s investigation into Petrofac concluded in October 2021, and all penalties imposed by the court have been paid by the company. Today, Petrofac has a comprehensive and robust compliance and governance regime.”

NBIM is the investment management arm of the Norwegian central bank, Norges Bank. It manages the investment in international assets of the Norwegian Government Pension Fund as well as the major share of Norges Bank's foreign exchange reserves and the Government Petroleum Insurance Fund.