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Fund not allowed to invest in makers of nuclear arms

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Opposition looking to change ethical guidelines

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Appears not to have enough support to overturn minority

government

By Gwladys Fouche

OSLO, May 7 (Reuters) - Opposition efforts to allow

Norway's $1.8 trillion wealth fund, the world's largest, to

invest in large defence companies appear to be faltering,

according to lawmakers involved in the process.

The fund follows ethical rules decided by parliament that

prevent it from buying stakes in the likes of Airbus,

Boeing ( BA ), BAE Systems and Lockheed Martin ( LMT )

on the grounds they make components for nuclear weapons.

Two opposition parties, the Conservatives and the Progress

Party, have in recent months called on lawmakers to change the

fund's guidelines on that point, coming at a time when European

countries are ramping up military investment.

Support for change also came from the head of the central

bank, which operates the fund, who said in February Norway "must

be open to the possibility that what is considered to be

ethically acceptable may change as the world again becomes

marked by military rearmament and growing tensions between

countries".

The Conservatives say it is no longer reasonable to exclude

companies that make equipment critical to Norway and its allies'

battle power.

The fund can invest in defence companies if they are not

involved in the production of nuclear weapons and is therefore

invested in the likes of Rheinmetall or Leonardo

. But the guidelines prevent the fund from investing in

several major defence companies.

Progress, meanwhile, is presenting a private member's bill,

which argues it is hypocritical of Oslo to ban its fund from

buying shares in Lockheed Martin ( LMT ) while buying 52 F-35 fighter

jets from the U.S. defence contractor at the same time.

"This is to make capital available to the defence industry,

which is especially necessary now," one of the co-authors of the

bill, Hans Andreas Limi, told Reuters.

They would require support from other parties to overturn

the will of the minority Labour government and allow one of the

world's largest investors to allot billions of dollars to

defence companies.

This could in turn encourage other investors sceptical of

the defence industry to reconsider their views, given the fund

has long been a leading voice on matters of ethical investing.

LACK OF SUPPORT

But supporters of the change appear to be facing an uphill

battle.

Among those opposing the change, is the finance ministry,

led by no other than former NATO Secretary General Jens

Stoltenberg of the Labour Party.

"We believe it is too early for another full review of the

guidelines now," Deputy Finance Minister Ellen Reitan told

Reuters. She said there had to be a broad consensus in

parliament and reviews of the fund's ethical criteria should not

be made on an ad hoc basis.

"Over time, it may be appropriate to change the criteria in

the guidelines. Such changes should be made on the basis of

comprehensive and thorough assessments where the criteria are

seen in context," she said.

In a sign of its opposition, the finance ministry did not

mention a possible change in its white paper on the fund in

April. The paper would be the natural place to flag the issue if

it were to be debated and voted on in parliament in the coming

weeks.

A key vote could come from the Centre Party, but it also

appears to be against the proposed change.

"To have calm around the fund is important, and a guarantee

of its perennity, so I think it is wise to proceed very

carefully," Trygve Slagsvold Vedum, the leader of the Centre

Party, who until January was finance minister, told Reuters.

Other parties, such as the Greens, concur.

"It is true that we are in a phase of massive military

armament, which we need to support," Rasmus Hansson,

parliamentary leader for the Greens, told Reuters.

"But we see no reason for it to be necessary for the

Norwegian sovereign wealth fund to profit from this rearmament."