AB InBev, maker of Budweiser, is one of 90 companies now excluded from the pension fund. Photo / 123RF
AB InBev, maker of Budweiser, is one of 90 companies now excluded from the pension fund. Photo / 123RF
Norway's largest pension fund will divest from companies that rely on alcohol and gaming to drive sales, in a push to purge so-called "sin stocks" from its portfolio.
KLP, an Oslo-based fund with US$80 billion ($122.2b) of assets under management, said on Tuesday that it will sell out of companiesthat derive more than 5 per cent of their revenues from alcohol or gambling.
Among the 90 now excluded companies, in which KLP holds combined stakes of US$320 million, are Budweiser maker AB InBev, champagne group LVMH, beer brewers Heineken and Greene King, online betting operator Paddy Power Betfair and spirits maker Diageo.
"This is not just about what gives the highest return, but also about our investments contributing to positive and sustainable social development," said KLP's chief executive Sverre Thornes. The pension scheme manages the retirement assets of about 1m public sector workers.
"It is a great responsibility, and we therefore regularly consider whether we do this in a good enough way," he said. "We want to invest the pension funds we manage in . . . businesses which to a greater extent contribute to a safe and better world for everyone."
The decision follows similar moves by other large institutional investors to more closely scrutinise environmental, social impact and governance standards in their portfolios.
While some stop short of excluding stocks from investment, many have been applying public pressure on management teams. The biggest US pension fund, US$210b-in-assets New York State Common Retirement Fund, for example, has urged ExxonMobil to do more to combat climate change.
"Larger pension funds tend to lead the way in adopting new policies," said Vassos Vassou, senior trustee representative at Dalriada, a London-based trustee services provider.
"[KLP's] type of action will help improve the behaviour of senior executives for the benefit of pension scheme members and wider society."
Online betting operator Paddy Power Betfair has also been excluded. Photo / 123RF
KLP pointed to a statistic from the World Health Organization that in Norway, more than 50 per cent of incidents of violence involve alcohol, and alcohol-related costs to the nation are estimated at US$2b annually.
"Exclusionary investments are very powerful when they're used in the right way," said Jeanett Bergan, KLP's head of responsible investments.
"The right way is through transparency. KLP publicly lists which companies they exclude and the reasons why. That has much more power than our ownership share represents."
Of the divestment, AB InBev said: "Based on ongoing dialogue with our existing and potential shareholders we understand that they value and appreciate our sustainability efforts."
The company pointed to its programmes to help reduce alcohol abuse globally, and its efforts to comply with UN environmental, social and governance targets.
The freed-up capital from KLP's divestments will be redistributed across the fund's existing investments. Bergan said that the sales are unlikely to have a "significant impact" on the fund's returns over the long term.
KLP has made similar moves before. Five years ago the fund dropped companies that derive more than half of their revenues from coal from its investments.
The fund sharpened that stance earlier this month, announcing that it planned to sell out from any company that earned more than 5 per cent of its sales from coal.
KLP has already divested from most of the 90 companies it identified under that initiative, except for a handful of Norwegian companies that it said were either less liquid, or would harm the company to divest too quickly.
Pornography is already excluded from the pension fund's portfolio, as are companies that generate sales from cannabis, both recreational and medicinal. Tobacco stocks were excluded as early as 1999.
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