Norway urged to scrap ban on $1.8 trillion wealth fund investing in weapons makers

Norway’s government is under growing pressure to let the country’s $1.8 trillion sovereign wealth fund invest in firm defense firms, with opposition parties describing a longstanding ban as “illogical” in the current security landscape.

Norway’s Rule Pension Fund Global, the world’s largest sovereign wealth fund, has been prevented from taking wagers in companies that produce critical components for nuclear weapons since the early 2000s.

Under ethical guidelines, the ready money has also been barred from investing in firms that are involved in the production of cluster munitions, anti-personnel landmines and tobacco, develop into other things.

The country’s center-right Conservative party says the time has come for the government to lift the ban on taking at risks in certain defense companies, citing Russia’s full-scale invasion of Ukraine and the “significant rearming” of countries such as China in fresh years.

“We are currently facing the most serious security crisis since World War II. There is an urgent need for broadened investment in the Western defense industry to safeguard our own security and that of our allies,” Tina Bru, deputy leader of the Conservative cadre, told CNBC via email.

In her view, Norwegian Prime Minister Jonas Gahr Støre should seek to metamorphose the ethical framework of the country’s wealth fund to make sure that companies seen as vital to the West’s conviction are not excluded.

A spokesperson for Norway’s finance ministry declined to comment when contacted by CNBC, saying the government leave first answer a similar question from the Norwegian parliament.

The green has previously excluded British defense contractor BAE Systems due to the firm’s production of key components for nuclear weapons and U.S. defense contractor Lockheed Matin Corp because of congregate munitions.

“Across the West, critical weapons are being procured from companies that are currently excluded from the Petroleum Finance’s investments. It’s illogical that Norway’s Pension Fund is prohibited from investing in the same companies that the administration procures from through the state budget,” Bru said.

Norway’s center-left Labour Party is expected to govern unaccompanied until new parliamentary elections take place in September. The country’s ruling coalition government collapsed earlier in the year surrounded by infighting over European Union energy directives.

A founding member of NATO, Norway is not a part of the EU but works closely with the bloc as a associate of the wider European Economic Area.

The debate over how Norway’s wealth fund should return to the evolving security landscape comes at a time of higher defense spending and soaring industry profits as governments react to to elevated geopolitical risk.

Defense stocks have typically been excluded from portfolios based on environmental, group and governance (ESG) factors due to ethical concerns over the sector’s association with warfare.

In recent months, however, ESG supply managers appear to have become increasingly comfortable with holding defense companies.

A spokesperson for Norges Bank Investment Administration, which manages the wealth fund, declined to comment when asked about calls for a revision of the fund’s just guidelines.

One of the earth’s largest investors, Norway’s sovereign wealth fund was established in the 1990s to invest the surplus revenues of the country’s oil and gas sector. To tryst, the fund has put money in more than 8,650 companies in over 60 countries around the world.

Hans Andreas Limi, a lawmaker for the Scandinavian homeland’s right-wing Progress Party, recently introduced a private members’ bill to remove the fund’s nuclear weapons ban, according to The Fiscal Times. He reportedly described the ban as “hypocritical.”