A committee appointed by the Norwegian government has published a report recommending that the country's sovereign wealth fund lift investment restrictions based on ethical risk, including a ban related to nuclear weapons and matters surrounding the conflict in Gaza.
The report, released on Thursday local time, argues that the world's largest sovereign wealth fund, which controls total assets of nearly $2.3 trillion, should be allowed to invest in companies that manufacture nuclear weapons. On Gaza, the committee also proposed that the fund stay out of diplomatic matters.
Led by former Norwegian central bank governor Svein Gjedrem, the committee recommended easing the fund's investment conditions as part of a broader overhaul aimed at giving the fund's manager — the central bank — more decision-making authority in handling ethical risks.
The review was driven in part by controversy over the fund's divestment last year from U.S. construction giant Caterpillar. The fund said the decision stemmed from allegations that Caterpillar was linked to human rights violations committed by Israel during the war in Gaza and in the West Bank. Washington has since pressed Oslo over the move.
"Part of the reason the committee was set up was the way the fund handled matters related to the war in Gaza," said the committee, which was tasked by the government. In its report, the committee argued that decisions concerning "the conduct of another state" should not be made by the fund but "belong to the ordinary diplomatic channels of the Norwegian authorities."
The committee's unanimous recommendations in the report, submitted to Norway's Ministry of Finance, also called for a review of the fund's exclusion of investments in companies involved in nuclear weapons production.
Citing Norway's dependence on NATO's nuclear shield and a deteriorating security environment, the report proposed allowing investment in U.S., British and French companies involved in nuclear weapons production. The proposals also extend to reshaping the role of the fund's independent ethics watchdog, allowing some assessments of potential investments to be kept confidential.
"Pandora's box"
The report has provoked fierce backlash in Norway, with opposition politicians criticizing the potential changes. Analysts, meanwhile, said easing ethical considerations could have wide-ranging effects.
"If Norway's sovereign wealth fund — often seen as a global standard-setter — changes its stance on nuclear weapons, that will open a Pandora's box for many global investors to follow suit," Lawrence Loh, director of the Centre for Governance and Sustainability at the National University of Singapore Business School, told Al Jazeera.
The committee framed the proposed change as a duty to protect Norway's national security, citing the country's reliance on allies' nuclear shield.
"The global security situation has changed. Norway is strengthening its defense capabilities, and the protection from NATO's nuclear shield is becoming increasingly important. The companies being brought back into the portfolio produce the kinds of weapons Norway needs for its own defense," the report argued.
Gareth Evans, a former Australian foreign minister, told Al Jazeera the report was "an encouraging initiative in a world that has become alarmingly complacent about the risk of nuclear war, when every major nuclear arms control agreement is either dead, dying, or on life support, and the long-standing taboo against threatening or using nuclear weapons is being eroded."
As U.S. President Donald Trump shakes up NATO, European countries are increasingly eager to join France's nuclear shield. Trump said on Thursday that Washington is negotiating with Russia and China to denuclearize the countries with the largest nuclear arsenals.
Loh, however, warned that changing the Norwegian fund's investment conditions could encourage other investors to pour money into nuclear companies "in scenarios other than Norway's condition that investee companies must be headquartered in allied NATO countries that possess nuclear weapons."
