According to Financial Times News, Norway has suspended its ethical investing rules to prevent its massive $2.1 trillion sovereign wealth fund from being forced to sell stakes in Amazon, Microsoft and Alphabet. Finance Minister Jens Stoltenberg revealed the US government had expressed concerns after the fund recently divested from Caterpillar over its bulldozers being used in Palestinian territories. The center-left government pushed an urgent proposal through parliament on Tuesday, putting the independent ethics council’s work on hold. The council was reportedly planning to investigate these tech giants for providing cloud and AI technologies to the Israeli government, based on a UN report from July that accused them of enhancing Israel’s “surveillance and analysis capacities.” Stoltenberg argued that divesting from these companies would undermine the fund’s purpose as a broad, diversified global investment vehicle.
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The political fallout
This wasn’t some quiet administrative change – it’s causing serious political drama in Norway. The proposal only passed with support from opposition center-right parties, while the government’s usual left-wing allies went ballistic. Arild Hermstad from the Greens put it bluntly: “It means that if you are a big enough company, you can do whatever you want.” Meanwhile, Socialist Left leader Kirsti Bergstø accused the government of accommodating “Trump’s fear-mongering” and tech oligarchs rather than listening to Norwegians’ moral convictions.
The diversification dilemma
Here’s the thing – Stoltenberg has a point about the practical realities. The biggest seven US tech companies make up more than 15% of the fund‘s equity holdings. That’s an enormous concentration that makes diversification incredibly difficult. When you’re managing a fund that contributes about a quarter of Norway’s entire national budget, suddenly being forced to dump your positions in the world’s most valuable companies becomes a genuine threat to the welfare state. It’s basically the “too big to fail” problem applied to ethical investing.
Broader implications for ethical investing
This situation reveals the fundamental tension in massive sovereign wealth funds trying to balance ethics with returns. The fund has already sold half its Israeli holdings and dumped Caterpillar under public pressure over Gaza. Now they’re hitting the pause button because the stakes – both financial and political – have gotten too high. And Stoltenberg dropped another bombshell: the upcoming ethics review will also consider whether to allow investments in defense companies like Boeing and Lockheed Martin, which have been off-limits for making nuclear weapons parts. The former NATO head acknowledged the “paradox” of enjoying Western nuclear protection while banning investments in the companies that provide it.
What comes next
So where does this leave ethical investing? The ethics council itself welcomed the review, noting the “political disagreement” about Israel-related companies. But this move essentially creates a two-tier system where some companies become untouchable due to their sheer size and market importance. The real question is whether this is a temporary pause or the beginning of a fundamental rethink of how massive funds can realistically apply ethical screens. When your portfolio is the size of Norway’s, every exclusion has ripple effects – and apparently, some companies are just too big to divest.
