Norway urges Exxon, not StatoilHydro, to cut CO2
OSLO (Reuters) - Norway's $400 billion oil fund has won praise abroad as setting a "gold standard" for sovereign wealth investors -- but can sometimes preach tougher corporate ethics abroad than the government practices at home.
A Reuters survey has shown the fund voted last year for tougher environmental standards at U.S. oil giant Exxon Mobil than the Scandinavian nation imposes on its own oil major, StatoilHydro.
The United States and European Union have said a key worry about sovereign wealth funds is that they may be used to secure strategic national goals, and the vote at Exxon Mobil shows that even the Norwegian fund, which has only small stakes, can take ethical decisions that favor Norwegian firms.
"That certainly can be seen as double standards," said Hans Henrik Ramm, an independent oil analyst and former deputy Norwegian oil minister.
The fund, built on cash amassed by the world's number five oil exporter, says it follows stiff ethical guidelines: refusing, for instance, to own shares in makers of nuclear arms, and stressing awareness of climate change.
But the central bank staff who manage the fund, which is wholly invested abroad in stocks and bonds, voted last year for Exxon Mobil to cut its greenhouse gas emissions when Norway makes no such demands of state-controlled StatoilHydro.
"The fund is a consequence of Norwegian political idealism and correctness. It's a 'do-gooder' thing abroad," Ramm said of the mismatch. "At home policies are more realistic and pragmatic."
He said it was easier to preach climate ethics when owning just 0.3 percent of the stock -- as the fund does in Exxon Mobil -- than when controlling 62.5 percent of StatoilHydro, the Norwegian government's stake.
The Finance Ministry said it was committed to environmental protection, both at home and abroad, and noted that Norway's strict domestic standards included the world's first carbon dioxide taxes imposed in the early 1990s.
"We cannot guarantee that every step we take for the environment is taken simultaneously in all sectors, everywhere and for all companies," Deputy Finance Minister Roger Schjerva told Reuters.
"We are sometimes accused of the opposite -- of setting tougher demands at home than abroad, of double standards that way. The accusations cut both ways," he said, adding that Norway's environment rules were among the world's strictest.
DOUBLE STANDARDS
Records of the fund's votes at companies' annual general meetings show that it voted in May 2007 for a proposal for Exxon Mobil to set goals for "reducing total greenhouse gases from the company's products and operations".
The proposal was filed by the Sisters of St. Dominic of Caldwell, New Jersey. Exxon Mobil's board urged shareholders to vote against it, saying it was committed to greater efficiency but that rising oil and gas production would push up emissions.
The proposal was defeated, by 68 to 32 percent.
StatoilHydro has not been told to reduce its carbon emissions, but argues that its emissions per barrel of oil produced off Norway are already among the lowest in the world. The company has several times topped indices for environmental awareness among oil companies.
Still, StatoilHydro's carbon dioxide emissions leapt to 14.6 million metric tons in 2007 -- about a quarter of all Norwegian emissions -- from 12.9 million in 2006, and may rise further when planned expansion in Canada takes place in coming years.
Some U.S. and EU politicians have expressed concern that sovereign wealth funds, mainly in the Middle East and Asia, lack transparency and may be investing for political rather than financial reasons. Singapore, for one, has rejected such "irrational fears" and welcomed rules on fund transparency.
Schjerva denied Norway was trying to give StatoilHydro a competitive advantage, and the country's oil fund is often held up as a model.
"The Norwegian sovereign wealth fund is exemplary in terms of transparency, governance and accountability," European Commission President Jose Manuel Barroso said on a visit to Oslo in February. "It's often seen as the gold standard."
Analysts say that a rule restricting the fund's stake in any company to five percent means it has no real power over big corporations. Norway's $1.5 billion holding in Exxon Mobil is the fund's biggest single investment in North America but represents just 0.3 percent of the firm's capital.
Hilde Nagell, a fellow of the ethics program at Oslo University, said it was hard for Norway to set rules abroad consistent in every case with those at home.
"However, if these double standards systematically result in less demanding requirements for (domestic) companies and industry, the double standard represents an ethical problem," she said.
Anne Kvam, head of corporate governance for the fund at the central bank, said the fund followed guidelines set by the Finance Ministry and clearly told all companies that it would focus on global warming.
"Serious climate change could have a significant negative effect on (Norway's) global portfolio," she said. The U.N. Climate Panel says climate change could bring more floods, heatwaves, droughts and rising sea levels.
NORWAY BACKS KYOTO
Norway is a strong supporter of the U.N.'s Kyoto Protocol for capping emissions until 2012 -- the United States is the only developed nation outside the accord.
Even without accepting Kyoto caps, companies can waste less energy by improving efficiency.
Exxon Mobil, often accused by environmentalists of failing to take climate change seriously enough, said it was slowing the rise in its emissions.
"Through efficiency actions taken in 2006 and 2007, we reduced greenhouse gas emissions by about 5 million tons in 2007, equivalent to removing about one million cars from roads in the United States," Exxon spokesman Gantt Walton said.
Among past controversies, the Norwegian fund sold its investments in U.S. defense contractor Lockheed Martin, accusing it of manufacturing cluster bombs -- bomblets that fall over a wide area and often kill civilians.
That decision was widely seen as counter to Norway's interests because Norway's Defense Ministry is considering buying new fighter aircraft to replace its Lockheed-made F-16s.
Schjerva at the Finance Ministry said the government had many ways of influencing StatoilHydro: "Most of StatoilHydro's activities are on the Norwegian shelf where they face the toughest environmental standards in the world," he said.
The left-of-centre government also wants Norway to be "carbon neutral" by 2030, when any emissions will be offset by cuts elsewhere.
(Editing by Tim Pearce)
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