SIC to look at Norwegian oil investments after debate on ethics of its own funds

The SIC is to examine the way the Norwegian state oil fund manages its investments, after some councillors attacked the local authority’s “intrinsically amoral” approach to investing its oil reserves on the stock market.

Jonathan Wills and Rick Nickerson have repeatedly been foiled when asking colleagues on Shetland Charitable Trust to look into more ethical ways of investing its £200 million-plus funds.

At today’s Full Council, though, the pair succeeded in persuading a majority of councillors to sanction a report looking specifically at the activities of the Norwegian government’s pension fund.

Dr Wills has long railed against the council and charitable trust using “tracker funds” to invest the community’s oil wealth. Such funds seek to match the general performance of the stock market and, because shares are essentially bought and sold by a computer, Shetland’s money can indirectly be put into any and every FTSE index company.

That means, Dr Wills said, that the council might be investing in companies which sold the weapons used by Colonel Gaddafi’s “thugs” to kill four children in Libya earlier this week. Equally, local authority funds may have bought a stake in the company responsible for the stricken Fukushima nuclear plant in Japan. “You keep ignoring these suggestions, but I’ll keep making them,” he informed colleagues.

Norway’s £280 billion sovereign wealth fund is so huge – accounting for around one per cent of all global stocks – that its investors hold a great deal of clout. It uses that power to push issues including climate change onto the agendas of big energy and utility companies. The fund has blacklisted many firms on purely ethical grounds and refuses to invest in companies which violate human rights or produce nuclear weapons and other armaments.

Three-quarters of council oil reserves are held on equities markets by managers GMO and Baillie Gifford, half of which are traded in the UK and the other half overseas. Companies on the FTSE index include British American Tobacco, Imperial Tobacco Group, weapons manufacturers BAe Systems and United Technologies Corp and mining companies BHP Billiton and Rio Tinto.

Dr Wills’ plea gained an unusually high level of support, including from former NHS Shetland chairwoman Betty Fullerton. She deplores investing in alcohol and tobacco companies and had “some sympathy” with his plea. She said everyone had been horrified by the pictures coming from Libya and Japan in recent weeks.

SIC political leader Josie Simpson acknowledged that the Japanese tsunami and its aftermath “breaks anybody’s heart”. But he did not want to start meddling and interfering in what fund managers could and could not do. “We’ve gone around the table on this many times,” he said. “Where do we stop?”

That chimed with councillor Gary Robinson, who recently picked up a guide to ethical living in a charity shop. He said it was “utterly impossible” to truly live ethically, asking whether it was permissible to drive a Vauxhall car given its manufacturer General Motors had funded George W. Bush’s election campaign. “We have to look for our returns to the community,” he said.

Mr Nickerson said no-one was suggesting that 100 per cent of the council’s funds should be invested ethically. He merely wants to take a look at the performance of ethical portfolios, highlighting the continually excellent performance of the Co-operative Bank which “wins year in, year out”.

Dr Wills concurred, saying he simply wished to engage with firms that have murky ethics and encourage them to improve their social and environmental performance. If advice contained in the report is that it would be “financially disastrous” to invest ethically, he would gain no support so colleagues had nothing to worry about.

On a recent visit to Bressay Primary School, Dr Wills had noted pupils were considering the moralities of food production. If children were thinking about ethical dimensions, so should adults and he wanted to see colleagues “stop trying to knock this down with silly arguments”. He and Mr Nickerson won the vote 11-7.

Amid political turmoil in the Middle East and North Africa, combined with the devastating earthquake and tsunami in Japan, the council’s investments have tumbled in the past few weeks. As of last Friday the investments were worth £216.7 million, down more than £10 million on their market value in mid-February.