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Complaint regarding investment in the South Korean steel company POSCO

In view of media enquiries in connection with a complaint against POSCO (South Korea), pension fund ABP/APG (Netherlands) and Norges Bank (Norway) filed by Lok Shakti Abhiyan, the South Korean Trans National Corporations Watch, the Fair Green and Global Alliance and the Forum for Environment and Development, the following information is provided as clarification:

24 May 2013

Complaint regarding POSCO

  • In autumn 2012, the Netherlands, Norwegian and South Korean Contact Points for OECD Guidelines for Multinational Enterprises received a complaint primarily directed at the South Korean steel company POSCO. The complaint also concerns two of the company’s minority shareholders, Norges Bank  and the Dutch pension fund ABP/APG.

  • The complaint concerns alleged violations by POSCO of the OECD Guidelines for Multinational Enterprises in connection with the company’s plans to develop iron mining operations, steel production and related infrastructure in the Indian state of Odisha.  This is one of the largest planned foreign investments in India.

  • POSCO is mainly accused of passivity in relation to allegations of human rights violations from outside the company and in connection with its preparations for the above investment. The human rights violations are particularly related to the acquisition of areas of land for the project and to the people who currently live and work in these areas.

  • The role of the OECD National Contact Points (NCPs) is to promote awareness of the OECD Guidelines for Multinational Enterprises and consider complaints against companies with international operations with regard to issues such as human rights violations and environmental damage. In Norges Bank’s view, it would have been appropriate for the Norwegian NCP to await the South Korean NCP’s consideration of the complaint against POSCO. To our knowledge, the South Korean NCP has not yet completed its consideration.

Norges Bank’s cooperation with the Norwegian national contact point

  • An initial meeting between the Norwegian NCP and Norges Bank was held on 29 November 2012.

  • The Norwegian NCP then sent a letter on 4 January containing detailed questions. Several of the questions were related to ownership work in general and we therefore called a meeting in a letter dated 31 January 2013. Norges Bank stated that the complaint against the Norges Bank concerning investment in POSCO should, in our assessment, be rejected.

  • At the meeting between Norges Bank and the Norwegian NCP on 12 February 2013, Norges Bank presented its work on responsible investment. Norges Bank went through the strategies, plans and methods used in its ownership work. We also answered the Norwegian NCP’s questions related to ownership work. In a letter of 15 February, we invited the Norwegian NCP to additional meetings if further information was required.

  • Even though Norges Bank’s view is that the complaint should have been rejected by the Norwegian NCP, we have nonetheless cooperated with the Norwegian NCP in its consideration of the case. We have answered questions posed and contributed our assessments. Norges Bank has chosen to adhere to the process despite our view that, as the Bank is a minority shareholder, the OECD Guidelines for multinational enterprises do not apply to the Bank.

Guidelines for Norges Bank’s ownership work

  • Norges Bank’s active ownership and work on responsible investment is integrated in an investment strategy based on the principle that a solid long-term return depends among other things on sustainable economic, environmental and social developments. The mandate from the Ministry of Finance, Norges Bank’s Executive Board’s principles for risk management and NBIM’s own principles for responsible investment all recognise the importance of social conditions in the broad sense.

  • Our ownership work takes starting point in  the OECD Principles of Corporate Governance. In addition, we base our ownership work on the OECD Guidelines for Multinational Enterprises and the UN Global Compact amongst others.

  • Norges Bank is of the view that OECD Guidelines for Multinational Enterprises is an important contribution to responsible business operations. We expect the companies we invest in to follow these guidelines and to make efforts to prevent breaches of the guidelines related to their own, or their subcontractors’, activities. We also support the NCPs’ work to highlight responsible business operations and their role in resolving potential breaches of the Guidelines for Multinational Enterprises.

  • In line with the drawing up of a framework for responsible investment, Norges Bank has made strategic choices by establishing focus areas. This includes an emphasis on children’s rights within our broader work on human rights.

Fundamental evaluations

  • Norges Bank has undertaken a thorough assessment of the scope of application of the OECD Guidelines for Multinational Enterprises. Our conclusion is that the complaint against Norges Bank should have been rejected by the Norwegian NCP. In our view, the Guidelines apply to the companies Norges Bank invests in, their business operations and subcontractors, but not to Norges Bank as a minority shareholder.

  • The Guidelines are directed towards conditions between business partners («business relationship»), entities in the supply chain, or other entities directly linked to an enterprise’s business operations, products or services. In our view, Norges Bank is not in such a business relationship with POSCO or the other companies in which Norges Bank holds a minority share.

  • The Guidelines also presuppose that there is a direct link between Norges Bank’s operations and the potential negative impact caused by the company in question. Norges Bank is of the view that there cannot be said to be a direct link between a minority shareholder and any negative impact caused by companies or their subsidiaries in which we invest.


Supervision of the management of the Government Pension Fund Global

  • The investment management guidelines for the Government Pension Fund Global (GPFG) have been laid down by the Ministry of Finance. The guidelines state that the Bank is to integrate the interests of good corporate governance and environmental and social issues in its investment activities, in line with internationally recognised principles for responsible investment. The Bank’s primary goal in its active ownership is to safeguard the Fund’s financial interests.

  • Norges Bank’s Supervisory Council is appointed by the Storting (Norwegian parliament) and is responsible for supervising the central bank’s activities and ensuring that the rules governing its activities are followed, including the activities of the GPFG. The Supervisory Council submits an annual report to the Storting.

Norges Bank is following the complaint towards POSCO with interest and concern.