At nearly 20 trillion NOK, Norway’s sovereign wealth fund is currently worth almost $1.98 trillion. The U.S. administration publicly criticized the fund over its decision to divest from American company Caterpillar and a number of Israeli financial institutions. This divestment is a response to concerns about the fund’s ties to the war taking place in the Gaza Strip. This decision has raised alarm bells in Washington, worried about the decision’s potential impact on U.S.-Norwegian relations.
As of the end of June this year, Norway’s sovereign wealth fund was invested in 61 different Israeli equities. But lately that’s changed — the fund has recently lowered its Israeli holdings to just six Israeli stocks. This is why Norges Bank Investment Management (NBIM) is divesting. They committed to divesting all their holdings in Israeli companies that do not meet their social equity benchmark index “as soon as possible.”
The U.S. administration has repeatedly expressed deep concern over this decision. A spokesperson from the U.S. State Department stated, “We are very troubled by the Norwegian sovereign wealth fund’s decision, which appears to be based on illegitimate claims against Caterpillar and the Israeli government.” This release, all well and good, highlights the tensions that have persisted around the fund’s portfolio shifts.
Caterpillar is the largest American maker of heavy machinery. At year-end 2022, it held a 1.2% ownership in Norway’s sovereign wealth fund. The fund’s exit from both Caterpillar and five Israeli banks came shortly after NBIM’s announcement regarding portfolio changes. This divestment was not taken lightly, as a result of grave allegations. As you know, Caterpillar’s products are being used by Israeli authorities to illegally destroy Palestinian property.
Norway’s Finance Minister Jens Stoltenberg clarified that the government does not influence the specific companies included in the sovereign wealth fund’s portfolio. He remarked, “The government is not involved in assessing individual companies,” emphasizing the independence of the Executive Board of Norges Bank in making such decisions. He emphasized that these actions are not politically motivated but are consistent with long-standing ethical principles.
The U.S. response Norway’s government gravity of the situation. Republican Senator Lindsey Graham condemned the divestment, calling it “shortsighted.” He stated, “To Norway’s sovereign wealth fund… Your decision to punish Caterpillar, an American company, because Israel uses their product is beyond offensive.” Graham cautioned that if left unabated, these actions would result in disastrous economic fallout. He called for tariffs on countries that don’t play ball with US companies.
Trond Grande, a vice president from NBIM, helped shed light on what drove the changes in the portfolio. He noted that Norway’s investments in Israeli companies are facing extraordinary pressure. This third concern stems from strong public sentiment in Norway against the continuation of the conflict. “Due to the conflict and due to opinion here in Norway, I should say there’s a lot of scrutiny around specifically our holdings in Israeli companies,” Grande stated.
More and more institutional investors are putting ethical concerns at the core of their investment policies. This transformation is nowhere more clearly seen than in the recent decision to divest from Caterpillar and others like it. This strategy aims to make American taxpayer dollars carry humanitarian and social justice values consistent with the sentiment of the American public towards geopolitical conflicts.