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Norway fund divests from Caterpillar ( CAT ) over equipment for

Israel

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Divests banks due to ethical concerns over West Bank

lending

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UN court deems Israeli settlements illegal, Israel

disputes

ruling

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Total value of divestment is close to $3 billion

By Gwladys Fouche

OSLO, Aug 26 (Reuters) - Norway's $2 trillion wealth

fund, the world's largest, said on Monday it has divested from

U.S. construction equipment group Caterpillar ( CAT ) and from

five Israeli banking groups on ethics grounds.

The five banks are Hapoalim, Bank Leumi,

Mizrahi Tefahot Bank, First International Bank of

Israel and FIBI Holdings, the fund said in

a statement.

The six groups were excluded "due to an unacceptable risk

that the companies contribute to serious violations of the

rights of individuals in situations of war and conflict," said

the fund, which is operated by Norway's central bank.

The companies did not immediately reply to requests for

comment. The Israeli embassy in Oslo declined to comment.

Prior to its divestment, the fund held a 1.17% stake in

Caterpillar ( CAT ) valued at $2.1 billion as of June 30, its records

showed.

The stakes in the five Israeli banks were valued at a

combined $661 million, also as of June 30, according to fund

data.

The news was announced when the Tel Aviv and New York stock

exchanges were closed.

Shares in Caterpillar ( CAT ) were down 0.4% in pre-market trading

at $430.61 per share on Tuesday.

FIBI Holdings shares were up 4%, putting them on

course for their best day since early 2024. Hapoalim's stock

was up 3.3% and Bank Leumi, Mizrahi Tefahot

Bank, and First International Bank of Israel

were between 1.8% and 2.8% better off.

Israeli shares have soared since Hamas' attacks in

October 2023. Bank Leumi has risen 120% since then, while the

rest of the banks the wealth fund has divested from have climbed

between 48% and 70%.

CATERPILLAR ( CAT )

The fund's ethics watchdog, called the Council on Ethics,

said that "in the council's assessment, there is no doubt that

Caterpillar's ( CAT ) products are being used to commit extensive and

systematic violations of international humanitarian law".

Bulldozers manufactured by Caterpillar ( CAT ) "were being used by

Israeli authorities in the widespread unlawful destruction of

Palestinian property," it said.

The violations were taking place both in Gaza and the West

Bank, the council said, adding that "the company has also not

implemented any measures to pre­vent such use".

"As deliveries of the relevant machinery to Israel are now

set to resume, the council considers there to be an unacceptable

risk that Caterpillar ( CAT ) is con­tributing to serious violations of

individuals' rights in war or conflict situations."

The council, a public body set up by the Ministry of

Finance, checks that firms in the portfolio of the fund meet

ethical guidelines set by Norway's parliament. The fund is

invested in some 8,400 companies worldwide.

It makes recommendations to the board of the central bank,

which has the final say. The board agreed with the council's

recommendation.

The Norwegian fund said on August 18 that it would divest from

six companies as part of an ongoing ethics review over the war

in Gaza and developments in the West Bank, but declined at the

time to name any groups until the stakes were sold.

BANKS

On the banks, the ethics watchdog initially scrutinised the

Israeli banks' practice of underwriting Israeli settlers'

housebuilding commitments in the region.

On Monday, the council said that all the banks excluded had,

"by providing financial services that are a necessary

prerequisite for construction activity in Israeli settlements in

the West Bank, including East Jerusalem ... contributed to the

maintenance of Israeli settlements".

Around 700,000 Israeli settlers live among 2.7 million

Palestinians in the West Bank and East Jerusalem.

Many settlements are adjacent to Palestinian areas and some

Israeli firms serve both Israelis and Palestinians.

The United Nations' top court last year found that Israeli

settlements built on territory seized in 1967 were illegal, a

ruling that Israel called "fundamentally wrong", citing

historical and biblical ties to the land.