Norway's Sovereign Wealth Fund May Re-enter Defense Sector Amid US Pressure

Norway's sovereign wealth fund, the world's largest, is considering a policy shift that could allow it to reinvest in major Western defense companies. This potential change follows recommendations from an independent committee tasked with reviewing the fund's ethical investment guidelines. The committee's review was prompted in part by friction with the U.S. administration over the fund's past decisions to divest from Israeli and American companies.

The fund, established in the 1990s to manage Norway's oil and gas revenues, currently oversees approximately $2.3 trillion in assets and holds about 1.5% of global publicly traded equities. Its existing ethical rules prohibit investments in companies involved in nuclear weapons production, such as Lockheed Martin, Boeing, Airbus, and BAE Systems, though it does hold shares in other defense firms like Germany's Rheinmetall and Italy's Leonardo.

The committee, led by former central bank governor Svein Gjedrem, proposes easing the ban to permit investments in nuclear weapons manufacturers from countries party to the Nuclear Non-Proliferation Treaty, provided they are also Norwegian allies. It also suggests dropping the requirement to assess whether these companies' products comply with international humanitarian law.

This review began in November 2025 after the fund's divestments from Israeli and American firms sparked controversy. In August of the previous year, the fund sold its stakes in four Israeli banks, Hapoalim, Leumi, Mizrahi Tefahot, and International, valued at around 2 billion shekels, citing their financial support for illegal settlement construction. It also divested from Caterpillar, stating its bulldozers were used for demolishing Palestinian structures. These actions drew criticism from the Trump administration, which accused the fund of relying on unsubstantiated claims.

The committee's report warned that ethical investment decisions could be perceived as Norwegian government policy, potentially leading to retaliatory measures, noting that "the liberal international order is in retreat." It also recommended reducing the powers of the fund's ethics council, limiting its role to analysis rather than recommending exclusions.

The recommendations have faced opposition from human rights organizations. Amnesty International warned of potential harm to human rights protections, while the Norwegian Red Cross deemed investing in nuclear weapons manufacturers "ethically and humanitarily inconceivable." The recommendations are not yet binding; the Norwegian government will conduct a public consultation, with the parliament expected to vote on potential changes by mid-2027.