World’s largest sovereign wealth fund must do better on human rights, report argues

The world’s largest sovereign wealth fund is failing to meet the United Nation’s Guiding Principles on Business and Human Rights, claims a new report, providing lessons for all businesses linked to conflict zones.

The report, by Dr Chiara Macchi, Dr Tara Van Ho and Luis Felipe Yanes of the Essex Business and Human Rights Project, examines the expectations placed on all investors in respect to human rights, focusing on the example of the Norwegian Government Pension Fund – Global (Statens Pensjonsfond Utland, or SPU, in Norwegian), and investments that fund has made in businesses linked to human rights abuses in the Occupied Palestinian Territories (OPT).

The authors conclude that the SPU’s Human Rights Due Diligence (HRDD) has been insufficient, the operation of its internal Council on Ethics requires reform, and that it should provide remedies and reparations where its investment strategy has contributed to the infringement of individuals’ human rights. 

The SPU’s investments in Hewlett-Packard Enterprise Co and Motorola Solutions are provided as specific examples where the fund could be contributing to breaches of human rights. 

Dr Van Ho said: “Businesses are implicated in a wide range of human rights issues in the OPT, ranging from illegally taking natural resources, to building the controversial and illegal border wall, to using water and other services that are denied to Palestinians on a discriminatory basis. SPU currently invests in some businesses that specifically contribute to some of these violations - they need to do a better job identifying those businesses and responding to their impacts.”

The Norwegian government has endorsed the UN Guiding Principles on Business and Human Rights, which the team used as its framework, as the “gold standard for responsible business conduct.”

Dr Macchi explained: “Under the Guiding Principles, businesses are expected to respect human rights even where the state fails to meet its own international obligations to protect human rights. To meet this expectation, businesses, including investors, must always undertake human rights due diligence to identify the risks they pose, and take steps to mitigate or remediate any negative impacts they have.”

Luis Felipe Yanes said: “Due to the severity of the violations in the OPT, and the potential for any business in the Territories to be implicated in those violations, all investments linked to business operations in the OPT should be subject to enhanced due diligence."

When addressing the human rights impacts of businesses they invest in, investors are encouraged to use leverage where possible, with divestment a last resort. Unfortunately, the authors argue, the gravity of the situation in the OPT means divestment may now be necessary in most cases. 

In addition to the OPT, territories in Western Sahara, Northern Cyprus, Syria’s Golan Heights, Eastern Ukraine, Crimea (Ukraine), South Ossetia (Georgia), Abkhazia (Georgia), and Transnistria (Moldova) are all under occupation. 

The SPU has a current value of over one trillion US dollars, making it the largest sovereign wealth fund in the world. A sovereign wealth fund is a state-owned investment fund used to benefit the country's economy and citizens.