Norway’s wealth fund is examining Chinese energy firm PetroChina Co Ltd (中國石油天然氣) and Italian defense firm Leonardo SpA to see if there is a risk of corruption in the future, the central bank said, after former executives at both firms were linked to graft.
Norway’s central bank, which has a unit to manage the US$935 billion fund, said in a statement on Friday it would also “raise the issue of the risk of severe corruption” with Italian oil and gas group Eni SpA and oil services firm Saipem SpA.
The fund has excluded Bharat Heavy Electricals Ltd (BHEL) from its investment portfolio because of concern over the environmental effects of a plant the Indian company is building, the central bank said.
Ethical guidelines drawn up by the Norwegian parliament bar the world’s largest sovereign wealth fund from investing in firms that are involved in activities such as producing nuclear weapons or tobacco products, or deemed at risk of corruption.
The fund’s Council on Ethics makes recommendations to the central bank’s executive board, which decides whether to act.
“The executive board has decided to place the companies PetroChina and Leonardo under observation based on an unacceptable risk that the companies contribute to, or are responsible for, severe corruption,” the central bank said.
It said the Council on Ethics had recommended both firms be excluded from the fund’s investments, but also said both companies “have taken measures against corruption.”
“The executive board believes that these measures provide sufficient grounds to observe the development in the future,” it said.
At the end of last year, the fund had a 0.13 percent stake worth US$182 million in PetroChina, whose chief executive officer between 2000 and 2013, Jiang Jiemin (蔣潔敏), was in 2015 sentenced to 16 years in prison for bribery and abuse of power. Jiang admitted guilt.
The Norwegian fund had a 1.53 percent stake worth US$124 million in Leonardo, whose former CEO Giuseppe Orsi was jailed by an Italian court for four-and-a-half years last year for corruption and falsifying invoices. Italy’s highest court ordered a retrial in December last year. Orsi denies the charges.
Leonardo told the Council on Ethics that graft allegations were leveled at the previous management team, not the company.
The central bank statement also said the executive board had “decided to raise the issue of the risk of severe corruption” with Eni and Saipem, which is controlled by Eni and Italian state lender Cassa Depositi e Prestiti SpA.
The fund is Eni’s third-largest investor with a stake of 1.72 percent and Saipem’s fourth-largest investor with a stake of 1.68 percent, according to Thomson Reuters data.
The Council on Ethics said executives and Eni itself were being investigated over allegations of corruption in Nigeria in 2011. Eni has denied that the company or its personnel were involved in any wrongdoing.
The Council on Ethics said the Italian prosecutors had accused Saipem of links to corruption, including in Algeria where it was alleged to have paid intermediaries to secure contracts. Saipem has said it could prove the allegations were groundless in court.
Meanwhile, the fund said it has sold all its holdings in BHEL, an engineering and manufacturing company that is majority-owned by the government of India.
Its stock was excluded from the Norwegian fund’s portfolio because of “the risk of severe environmental damage” resulting from the building of a coal-fired power plant close to the Sundarbans, the world’s largest mangrove forest, in Bangladesh, the Council on Ethics said.
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