Ethical business: Norway ejects mining giant Rio from its pension portfolio

Rio Tinto, one of Britain's most blue chip corporate names, has been thrown out of a sovereign wealth fund's portfolio for allegedly subjecting it - potentially - to "grossly unethical conduct" through its involvement in the world's biggest gold mine.

Norway's Ministry of Finance said early this week that it was selling off the 500m stake held in Rio Tinto by its Government Pension Fund - Global, commonly known as the "oil fund". Kristin Halvorsen, the Norwegian finance minister, said the problems with Rio Tinto, the world's second-largest iron ore miner, concerned a joint venture with Freeport McMoRan, a company excluded by the fund in 2006, at a mining operation in Indonesia. "Exclusion of a company from the Fund reflects our unwillingness to run an unacceptable risk of contributing to grossly unethical conduct. The Council on Ethics has concluded that Rio Tinto is directly involved, through its participation in the Grasberg mine in Indonesia, in the severe environmental damage caused by that mining operation," she said.

"There are no indications to the effect that the company's practices will be changed in future, or that measures will be taken to significantly reduce damage to nature and the environment," she added in a formal statement posted on the website of the finance ministry in Oslo. The Grasberg complex is the biggest gold mine in the world, and the third biggest for copper. Last year, a study published by War on Want claimed that local people had suffered serious human rights and environmental abuses.

Rio Tinto joins a list of other British companies deemed too "unethical" including arms manufacturer BAE Systems, and support services group Serco which was removed from the fund last year due to its involvement in the UK's Atomic Weapons Establishment. A host of American companies have also been deemed off-limits including Asda's parent group, Wal-Mart, technology group Honeywell and defence company Lockhead Martin.

Rio Tinto expressed frustration at the move by the Norwegians, saying it was long-recognised as a leader in the field of environmental consciousness and was not even the operator of the Grasberg mine which had anyway being given the green light by independent auditors. "Our immediate response is one of surprise and disappointment," said Rio Tinto spokesman Nick Cobban in London. "We have an exemplary record in environmental matters, world leading in fact, and they are given the very highest priority in everything we do."

The finance ministry also said it had considered but rejected a recommendation from the fund's Council of Ethics to exclude biotech seed maker Monsanto. The government chose to keep its Monsanto shares and had worked within the company to bring about a "significant reduction in the use of child labour" in cotton seed production in India. "The ministry of finance has therefore decided not to exclude Monsanto Co from the portfolio," it said.

Halvorsen said the magnitude of the reduction in child labour was uncertain, but estimates put it at 90% in one Indian state and 70% in another. "The Norwegian people's savings are making a difference for children," she said. No one at Monsanto was immediately available for comment. The Government Pension Fund - Global invests most of Norway's oil and gas revenues in foreign stocks and bonds to save for the future when the hydrocarbons run out.

(By Terry Macalister, The Guardian, 09/09/2008)