Norway govt fund sells its Vedanta stake3 min read . Updated: 07 Nov 2007, 11:52 PM IST
Norway govt fund sells its Vedanta stake
New Delhi: A $350 billion (Rs13.76 trillion) sovereign wealth fund run by Norway has sold its entire stake in Vedanta Resources Plc., a mining and metals company with a significant presence in India, and operations in Zambia, Australia and Armenia because of what one Norwegian government official referred to as “environmental and human rights violations" by the firm.
Shares of Vedanta on the London Stock Exchange were trading at £20.71 (Rs1,702) each, down 2.03% at 3.46pm GMT.
“I am not aware of any such situation because I have just landed in India," said Anil Agarwal, chairman of Vedanta.
Norway’s government pension fund, Global, commonly known as the “oil fund", invests Norway’s petroleum wealth in foreign stocks and bonds to save for when its oil and gas run out. It is one of the world’s biggest sovereign wealth funds. At the end of 2006, the fund owned a 0.16% stake in the company worth $15.16 million. The country’s finance ministry said all shares had been sold by the end of October.
Other Vedanta officials denied the ministry’s charges.
“Vedanta Resources absolutely rejects any suggestion of causing damage to people and the environment. We believe in sustainable development and are committed to effective management of health, safety, environment and community development as an integral part of our business. The impact of our investment in some of the world’s poorest regions has been remarkable and acknowledged," said Tarun Jain, director, Sterlite Industries Ltd, Malco Ltd, Balco Ltd and Hindustan Zinc Ltd (all Vedanta group companies), and a spokesperson for the firm.
Vedanta’s operations in India are spread over 19 production sites in six states.
“According to the recommendations (of the ethics council of the fund), the fund runs an unacceptable risk of complicity in present and future severe environmental damage and systematic human rights violations by continuing to invest in the company," Norway’s finance ministry said in a statement late on Tuesday.
The ethics council said, “allegations levelled at the company regarding environmental demage and complicity in human rights violations, including abuse and forced eviction of tribal people, are well founded." It said its review extended to Vedanta subsidiaries Sterlite, Malco, Balco and Vedanta Alumina, though the fund did not have direct holdings in those companies.
The council said it had contacted Vedanta Resources in March asking for its comments on its (the council’s) draft recommendations and, after an extension, had given the company until 20 April to respond. But the company did not respond till 15 May.
Last month, thousands of tribal people protested against a Vedanta Resources alumina refinery being set up in the Lanjigarh area of Orissa and vowed to stop the $874 million project. This project involves mining bauxite in the Niyamgiri hills.
It has already been challenged in the Supreme Court by those being displaced.
“In cases of severe unethical activites, we try to use our ownership to make the companies change their behaviour; however, the violations of Vedanta have been so serious and we don’t see any initiative from the company to change its past record. Therefore, we do not want to contribute in a company, where environmental and human rights violations seem to be a part of their business strategy," said Roger Schjerva, state secretary, ministry of finance, Norway, in a telephone interview.
Jain denied these charges and added that several of Vedanta’s companies in India had won awards for environmental management, including an award that Malco won for ‘Excellence in Environment Management’ from The Energy Research Institute (Teri).
The ethics council of the fund examined instances of illegal expansion of capacity, health and environmental damage at the Tuticorin copper smelter and refinery run by one subsidiary, environmental impact and health burden on the local population at the Malco complex in Tamil Nadu, forced eviction of tribals for a bauxite mine in Chhattisgarh and human rights violations, forced evictions, threats and abuses against local residents as well as breaking national laws and providing false information to obtain an environmental clearance for the proposed bauxite mining site in Niyamgiri.
The oil fund has, on the recommendations of its ethics council, blacklisted 24 companies and withdrawn investments from them in the past. “In the past, we have withdrawn from Wal-Mart on human rights and forced labour issues and also from Boeing as they were involved in weapons production, which we don’t support," added Schjerva.
Recently, the fund has withdrawn from the South African mining company, DRD Gold, South Korean arms company Poongsan Corp., mining company Freeport operating in Indonesia, and seven more companies involved in manufacturing nuclear weapons.
Mint’s Maitreyee Handique and Reuters contributed to this story.