But they are statements, and when the Norwegian fund speaks, people tend to listen.
Norway’s sovereign wealth fund took a principled step in May when it excluded two companies from investment because of their involvement in Israeli settlements on the West Bank.
Norges Bank Investment Management, which runs the $1.3 trillion Government Pension Fund Global fund, excluded Shapir Engineering and Industry and Mivne Real Estate KD on the advice of the Council on Ethics “due to unacceptable risk that the companies contribute to systematic violations of individuals’ rights in situations of war or conflict,” it said in a statement.
Israel’s settlements in the West Bank, which it captured in 1967 in the Six Day War, are widely considered illegal under international law.
NBIM is a powerful institution; it owns about 1.5% of all listed stocks globally, and tends to generate its own weather patterns in the investment markets.
But its holdings here were relatively small. The recommendation resulted in it divesting $1 million of stocks in Shapir Engineering and $12 million in Mivne, based on holdings at the end of 2020.
Comparison
Global SWF, a data platform tracking sovereign funds, was quick to point out that any symbolic impact the Norwegian decision might have would be put into stark relief by the inflow of capital from the UAE into Israel.
“NBIM’s decision is completely dwarfed by capital from the UAE fund Mubadala,” says SWF, which notes that in April the fund agreed to acquire a 22% stake in Israel’s offshore Tamar gasfield for $1.1 billion.
NBIM’s decision is completely dwarfed by capital from the UAE fund Mubadala
SWF
The two things are hardly equivalent: NBIM certainly doesn’t exclude all of Israel from its investment universe, just those stocks that it considers to have ethical issues attached to them (it has also pulled out of a Japanese company called Honey Holdings, for example, over concerns over its treatment of workers at factories in Myanmar).
The Norwegian fund holds stakes in dozens of Israeli companies; at the time of writing it owned 3.09% of Bezeq, a telco, and 2.34% of Cellcom Israel, for example.
The two Israel divestments were specifically linked to West Bank development at a time of considerable violence between the other part of the Palestinian Territories, Gaza, and southern Israel.
Mivne lets out industrial real estate linked to Israel settlements, and Shapir constructs homes in the settlements. And the Tamar field has nothing to do with that struggle.
But it does show how the Abraham Accords Peace Agreement brokered by the administration of president Donald Trump in August 2020 has allowed the UAE fund to invest in Israel. (Elliot Wilson wrote about the accords in our December edition.)
And it is very clear that the sums coming into Israel afresh from Gulf states will be far greater than anything that is withheld because of Israel’s positions with Palestine.
Interests
Mubadala has also invested in Israel through its renewables arm, Masdar, which has a strategic cooperation agreement with Israel’s EDF Renewables, which operates solar energy projects there.
As Global SWF points out, the sovereign fund with the most targeted interest in Israel is Singapore’s Temasek, which has long been attracted to the technological capabilities found there.
In 2020, it invested $365 million in an 85% stake in Rivulis Irrigation, an agritech business, while in 2018 it acquired Israeli cybersecurity business Sygnia for $250 million.
The fund has also backed cybersecurity startup foundry Team8 and shopping automation startup Trigo Vision in Israel, as well as backing the Tel Aviv-based venture capital firm Red Dot Capital and Vertex Ventures Israel.
In 2019, before Covid stymied international travel, Temasek sent a seven-person delegation to Israel to look for investment opportunities, led by Anuj Maheshwari, managing director of agribusiness and Middle East and Africa for Temasek. Israel offers many assets that chime with Singapore investment and national security priorities, such as food security and technological innovation.
Generally, when sovereign funds want to take an ethical position, they do so by excluding particular sectors.
NBIM, for example, publishes clear expectations of portfolio companies, largely coinciding with the Sustainable Development Goals. These cover children’s rights, climate change, water management, human rights, anti-corruption and even tax transparency.
It also excludes tobacco, weapons and coal.
Exclusions based on something more overtly political like this are rarer and, in financial terms, not particularly powerful.
