World’s Biggest Wealth Fund Awaits Verdict on Textile Makers

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The ethics council that guides Norway’s $820 billion sovereign wealth fund is zeroing in on the textile industry for breaching its standards in a development that may lead to some companies being excluded from the fund’s portfolio.

In a study of about 400 textile manufacturers, about “two handfuls” have been singled out and contacted, Johan H. Andresen, the chairman of Norway’s Council on Ethics, said in an interview on Thursday at his office on the outskirts of Oslo.

Johan Andresen
Johan Andresen
Photographer: Simon Dawson/Bloomberg

“We will see whether we think that they are willing and able to make changes in their conduct,” he said.

As investors shrink away from Volkswagen AG following its emissions scandal, Andresen said hot-spots of media focus aren’t always the areas his council deems the most pressing.

Instead, he spoke of the “slavery” and other “shocking revelations” relating to how garments for western consumption are produced, “and nobody raises an eyebrow in our part of the world.”

Norway’s wealth fund isn’t the only big investor treating the textile industry with growing caution. Nordea Asset Management, a unit of Scandinavia’s biggest bank which oversees about $320 billion, said in August it has investigated textile suppliers to Hennes & Mauritz AB as part of its effort to ensure it only holds ethically sound assets.

The Norwegian fund takes into account ethical rules encompassing human rights, some weapons production, the environment and tobacco. It has excluded more than 60 companies after recommendations from the council, including global giants like Wal-Mart Stores Inc.

Andresen said his council’s studies of the textile industry have found “strong indications of forced labor at least in the past and we will have to judge if that will be a possibility also in the future.”

The council is unlikely to make recommendations to the wealth fund that punish a company for past misdeeds, provided it shows real evidence it has put in place processes that will lead to improvement, Andresen said.

He also said his council hasn’t started any study on the car industry since the VW scandal, and declined to comment on specific companies.

The textile manufacturing industry made global headlines in 2013 with the collapse of the Rana Plaza complex in Bangladesh that killed more than 1,100 people. A nationwide strike by garment workers in Cambodia last year also left three dead.

A report by the Clean Clothes Campaign and workers’ rights groups released this week criticized H&M for being behind schedule in “correcting dangers” faced by Bangladeshi workers who produce its clothing. Based on public information, the analysis shows that the company “has not honored its commitments to ensure the safety” of the workers in Bangladesh, according to the report.

H&M said in an e-mailed comment on Friday that it has had “some delays” in fixing factories, which is “of great concern.” The company is one of about 200 brands that have signed the Bangladesh Accord on Fire and Building Safety to make textile work safer.

“Our own internal follow-up data shows that the factories where we are the lead brand have completed nearly 60 percent of all required improvements and are scheduled for validation by the accord,” H&M said.

The Norwegian ethics council’s work has already had real impact, Andresen said. Agents contracted by the group in an unidentified country saw a building facing similar risks to Rana Plaza and alerted an American customer that then went in and physically fixed it, reinforcing the building, he said.

“If there are gross violations of safety that could be a gross violation of human rights, workers’ rights,” Andresen said.

*This story first appeared on Bloomberg here.

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