Norway’s sovereign wealth fund should monitor its investment in Indonesia‘s Astra International to ensure its palm oil operations don’t break ethical guidelines, the Norwegian central bank said on Tuesday.
The decision gives the company four years to meet the $856 billion fund’s ethical standards. If it fails, Norway could sell its 0.3 percent stake, worth $73 million according to Thomson Reuters data.
Astra International is one of the biggest companies listed on the Jakarta stock exchange, with a market value of around $18.5 billion and businesses spanning auto distribution and palm oil to mining equipment and financial services.
It held a 79.7 percent stake in palm oil producer PT Astra Agro Lestari Tbk as of end-June, the data shows.
The Norwegian central bank, whose board supervises the sovereign wealth fund, said on Tuesday the fund should put Astra International under observation due to its involvement in turning tropical forest into palm oil plantation via PT Astra Agro Lestari Tbk.
The fund does not invest in a range of companies that contradict its ethical aims, including firms involved in producing tobacco, nuclear weapons or cluster munitions.
In 2013, the fund divested from 23 firms involved in the destruction of rainforests.
Joko Supriyono, a director at Astra Agro Lestari, declined to comment when contacted by phone.
In June Astra International said it would immediately cease all logging and land conversion while developing a new sustainability strategy.
The independent body that recommends possible exclusions by the Norwegian fund, the council on ethics, said Astra International should be put under observation.
“The Council recommends an observation period of four years to allow the progress and impact of the company’s new policy to be assessed,” it said in a statement published on Tuesday and dated June 23, 2015.
The fund has excluded 64 companies and, following Tuesday’s announcement, put two companies under observation.
(Editing by Ruth Pitchford)