Norges Bank's Executive Board has decided to exclude the company Power Construction Corp of China Ltd due to "unacceptable risk of the company contributing to or being responsible for serious environmental damage", ref. the conduct-based criterion in the Guidelines for Observation and Exclusion from the Government Pension Fund Global § 4 e. The decision is based on a recommendation from the Council on Ethics of 14 February 2023, based on the company’s hydropower development in Batang-Toru in Indonesia.
The Executive Board has also decided to place Petrofac Ltd under observation for a period of three years due to unacceptable risk of gross corruption or other serious financial crimes, ref. the conduct-based criterion in the Guidelines for Observation and Exclusion from the Government Pension Fund Global § 4 g. The decision is based on a recommendation from the Council on Ethics of 3 April 2023.
The Executive Board has not conducted an independent assessment of all aspects of the recommendations but is satisfied that the exclusion criteria have been fulfilled. Before deciding to exclude a company, Norges Bank shall consider whether the use of other measures, including the exercise of ownership rights, may be better suited. The Executive Board concludes that it is not appropriate to use other measures in these cases.
Furthermore, the Executive Board has decided to end the special exercise of ownership in UPL Ltd. After a recommendation from the Ethics Council for observation due to unacceptable risk of the company contributing to or being responsible for serious human rights violations, Norges Bank decided in 2018 that the case would be raised with UPL through a special exercise of ownership over a period of five years. The background for the recommendation was the use of child labour in UPL’s seed supply chain in India, through the subsidiary Advanta Seeds.
The special ownership period has now expired. Based on measures UPL has taken during the period, which are confirmed by both internal and external investigations, the Executive Board finds that the forward-looking risk of violations appears reduced. The Executive Board has therefore decided that the special exercise of ownership following the guidelines will be terminated.
See more information on the decision to end the special exercise of ownership in UPL Ltd below.
The Council on Ethics’ recommendations:
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More information on the decision to end the special exercise of ownership in UPL Ltd:
On 1 March 2018, the Council on Ethics recommended that Norges Bank place UPL Ltd (UPL) under observation on the grounds of unacceptable risk that the company contributed to or was responsible for serious human rights violations (cf. the conduct-based criterion in the Guidelines for Observation and Exclusion from the Government Pension Fund Global). The recommendation was based on the use of child labour in the company’s seed supply chain in India through its subsidiary Advanta Seeds (Advanta). The Executive Board of Norges Bank decided that the matter should instead be taken up with the company through active ownership over a period of five years.
The five-year period has now ended. Based on measures UPL and Advanta have implemented over the course of the period, which are confirmed by our own and external investigations, the Executive Board finds that the risk of future norm violations appears to be reduced. The Executive Board has therefore decided to conclude the special dialogue with the company under the Guidelines on Observation and Exclusion.
The aim of the dialogue with UPL has been significant reduction in the use of child labour in the subsidiary Advanta through appropriate policies and processes to prevent and manage the risk of child labour. Over the course of the five-year period, Norges Bank has had 11 meetings with UPL and Advanta, including a visit to the companies in India as well as regular written correspondence.
During the ownership period, UPL has adopted new and updated board-approved policies that include zero-tolerance for child labour, for its own operations and the supply chain. This includes updated contracts for farmers producing seeds for Advanta. The companies have also implemented a broad five-year campaign, “United Against Child Labour”, with the aim to prevent and manage the risk of child labour in the seed supply chain. The campaign has included communication of UPL and Advanta’s updated child labour policies through local community workers, recognition of farmers and villages, dialogue with local authorities and schools, and follow-up on children’s school attendance throughout the year. Advanta has also joined the industry initiative ECHO Forum where seed companies share experiences and work to improve industry practice. They have also run pilot programmes where children of farmers are given vocational training after completing elementary schooling.
UPL and Advanta have further implemented measures to improve their child labour monitoring systems. This includes new and updated tools and training for employees as well as monitoring by different teams at various stages of the seed process. The companies have set up a three-tier escalation process for any violations of their policies, which entails penalties after repeated violations. In addition to the companies’ own monitoring, there have been several external evaluations/audits conducted, which have shown promising results.
As the use of child labour continues to pose a serious risk to children’s rights, and the seed sector in India generally is exposed to this risk, a continued focus on prevention, monitoring and remediation of child labour will be important for the companies going forward. Norges Bank plans to continue to engage with UPL as part of its regular ownership activities.