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Parliament pauses ethical divestments amid scrutiny

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Finance Minister Stoltenberg cites need to protect fund's

value

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Government worried about Trump, says Socialist Left

lawmaker

(Updates throughout with parliament adopting proposal)

By Gwladys Fouche

OSLO, Nov 4 (Reuters) - Norway's parliament on Tuesday

voted in favour of pausing ethical divestments by its $2.1

trillion sovereign wealth fund, the world's largest, while it

updates the fund's ethical guidelines.

The move, proposed by the minority Labour government early

on Tuesday, came at a time of intense international scrutiny on

the fund's ethical divestments.

In September, the U.S. State Department said it was "very

troubled" by the fund's decision to divest from construction

equipment group Caterpillar ( CAT ) over the use of the

company's products by Israeli authorities in Gaza and the

occupied West Bank.

"The world has changed since the ethical guidelines were

first adopted," Finance Minister Jens Stoltenberg told

parliament earlier on Tuesday. "The rules need to be reviewed."

DIVESTMENT GUIDELINES TO BE REVIEWED

The fund's ethical guidelines, set by parliament, were first

introduced in 2004. They stipulate, among other things, that the

fund cannot invest in companies involved in serious violations

of individuals' rights in war or conflict situations.

An independent ethics body investigates alleged breaches and

recommends companies for divestments. The decision to pull out

is ultimately taken by the central bank's board.

These recommendations to divest will now be put on hold for

a period of roughly a year while guidelines are reviewed,

Stoltenberg told parliament.

The Conservatives, who supported the proposal, still

questioned why the decision was being rushed when usually this

would take months, if not years, to get through parliament.

DECISION NEEDED TO 'PROTECT' FUND

Stoltenberg said it was needed to do this to protect the

fund, which now finances 25% of public spending, at a time when

a significant part of its value is dependent on a handful of

companies.

"The seven most valuable companies in the world provide 16%

of the fund's stock holdings," said Stoltenberg, referring to

Nvidia ( NVDA ), Microsoft ( MSFT ), Apple ( AAPL ), Amazon ( AMZN )

, Alphabet, Meta and Broadcom ( AVGO )

.

"Under today's ethical guidelines for exclusions, we must be

prepared that we may no longer be able to invest in the world's

biggest companies. Then we would not remain as a broad, global

index fund," he said.

Three parties Labour relies on to pass its budgets condemned

the proposal.

During the Nordic country's most recent election campaign,

in August and September, the fund's investments in Israel took

centre stage, with some parties campaigning on the issue.

One said it would only support a future Labour government if

it divested from all companies involved in what it called

"Israel's illegal warfare in Gaza".

On Tuesday, that party, the Socialist Left, said the

government was acting out of fear of the United States.

"(This) is, without a doubt, really about the fear of

Trump's reactions," Socialist Left lawmaker Ingrid Fiskaa told

parliament.

Separately, the fund's management said it would vote against

ratifying Tesla CEO Elon Musk's proposed compensation

package, containing shares worth up to $1 trillion, which

critics have called excessive.