Norway's wealth fund set to overhaul ethical rules after US scrutiny

OSLO, Oct 15 (Reuters) - Norway is expected to overhaul the ethical rules for its $2.3 trillion wealth fund in response to the findings of a state-appointed commission due on Thursday, a year after it paused divestments in the face of US scrutiny.

The ‌Trump administration had protested against the fund's divestment from Caterpillar shares over the use of the US company's bulldozers in Gaza and the ‌occupied West Bank.

Weeks later, Norway's parliament voted in favour of pausing ethics-based divestments by the world's largest state-owned fund pending the outcome of a review, the findings of which are due to ​be released at 0700 GMT on Thursday.

The government denied this move was motivated by concerns over consequences of potentially upsetting the US, where more than half of the fund's assets are invested.

Before the suspension, the Council on Ethics, the fund's independent ethical watchdog, made recommendations to divest and sent them to the board of the central bank, which had the final say. The board usually followed the council's recommendations.

Since the suspension, all recommendations have instead been sent to Norges Bank Investment Management, ‌which is the fund's operator, with no divestments made ⁠over the period.

Finance Minister Jens Stoltenberg said securing the fund, which finances a quarter of the country's public spending, was "one of the most important things we do in Norway".

"The world is changing and the value chain is becoming more and more ⁠integrated. It is difficult to distinguish between civil and military products," he told Reuters on Wednesday.

He also pointed to the concentration of the fund's value in a handful of companies, mostly US tech giants such as Nvidia, Apple and Amazon, with 10 accounting for more than 20% of the value of its share portfolio.

"This type of concentration ... ​means ​that individual decisions can have much greater consequences than in the past," said Stoltenberg, ​a former NATO secretary-general, adding that his priority was for ‌the fund to remain broadly invested.

"We should not do things that can undermine that. At the same time, we must have a good ethical framework," he said in an interview in Norway's parliament.

The commission's proposals will form the basis for the government to make its own as part of an annual white paper on the sovereign wealth fund which is expected in spring 2027.

One possible change concerns the fund's ban on investing in companies making nuclear weapons, or key components, effectively ruling out the world's largest defence companies.