Giant Investment Fund Drops Four Shipowners Over Scrapping

Norway's sovereign wealth fund, the largest in the world at a valuation of $1 trillion, has decided to exclude four shipping firms from its portfolio over their shipbreaking practices. All will be excluded from the influential fund for a period of at least four years. 

Based on an assessment of the risk of "severe environmental damage and serious or systematic violations of human rights," Norges Bank has excluded Evergreen Marine Corp (Taiwan) Ltd, Korea Line Corp, Precious Shipping PCL and Thoresen Thai Agencies, the parent company of Thoresen Shipping. It has also placed Pan Ocean Co. under observation for the same risks. 

The fund's Council on Ethics based its recommendations on the common practice of scrapping ships at beaching yards in Pakistan and Bangladesh. It asserted that working conditions at the yards are extremely poor and that the process harms the environment. "The Council considers that by disposing of ships for scrapping in this way, the company can be said to contribute to serious human rights violations and severe environmental damage," it concluded. Further, it found that beaching “is a consequence of an active choice on the part of the company that owned the vessel to maximise its profit . . .  There are better ways of dismantling ships that are readily available to the shipowner, but these are more expensive." 

In the case of Pan Ocean, the Council on Ethics adjusted its recommendations to account for the company's promise to take the method of scrapping into account when deciding how to sell its obsolete tonnage. The pledge is non-binding, but it secured Pan Ocean a four-year period of observation rather than exclusion. 

An overwhelming percentage of the world's tonnage is scrapped at South Asian beaching yards, including many vessels from leading European shipowners; these yards typically pay more per tonne than competitors in Turkey and China, where ships are dismantled alongside piers or in graving docks. At present, the Council on Ethics restricted its review to Pakistani and Bangladeshi facilities. It was not immediately clear whether the sanctions could be extended to cover similar practices used to scrap vessels in India.

Anti-beaching advocates reacted positively to the news of Norges Bank's decision. “This is the first time that shipping companies have been excluded from an investment fund based on their poor shipbreaking practices, and coming from the largest investment fund in the world, it sends out a strong signal to all financial institutions to follow suit," said Ingvild Jenssen, Founder and Director of the NGO Shipbreaking Platform.

In the same notice, Norges Bank also said that it would exclude several firms with business lines related to nuclear weapons, including defense conglomerates Huntington Ingalls Industries and BAE Systems. BAE has a contract for the maintenance of the Trident and Minuteman III nuclear ballistic missile systems, and Huntington Ingalls has business interests related to the manufacture of tritium and the supply of equipment used for nuclear testing. Both firms also have extensive defense shipbuilding interests. 

The bank has also excluded Polish property development company Atal SA after reports that the firm is employing a subcontractor that uses North Korean workers. Atal has confirmed the reports, and the Council assessed that the firm is therefore "contributing to serious human rights violations, including forced labour." Under U.N. Security Council sanctions over North Korea's nuclear weapons programs, member states have until December 2019 to deport North Korean workers, whose wages are among Pyongyang's leading sources of revenue.