Norway’s government is being pushed to rethink ‘illogical’ ethical ban on its $1.8 trillion sovereign wealth fund investing in defense

The Norwegian sovereign fund worth $1.8 trillion, designed to help Norway’s government manage revenue from its oil and gas reserves, is being urged to invest in weapon makers as the security environment in Europe becomes dour. 

Norges Bank Investment Management has steered clear of backing certain defense and weapon companies as they violate its ethical standards. 

The Oslo-based fund maintains a long list of roughly 250 companies it excludes from its investments, including defense giants like Boeing, Airbus, BAE Systems, and Lockheed Martin.

Other companies have been barred owing to corruption, manufacturing harmful products like tobacco, or causing environmental damage.  

However, as Europe enters a new era of fending for itself on all matters, including security, its two opposition political parties are urging the Norwegian government to reconsider its ban on such industries. 

“We are currently facing the most serious security crisis since World War II. There is an urgent need for increased investment in the Western defense industry to safeguard our own security and that of our allies,” Tina Bru, deputy leader of Norway’s Conservation party, told Fortune in an email. 

“It’s illogical that Norway’s Pension Fund is prohibited from investing in the same companies that the government procures from through the state budget.”

Norges Bank’s executive board, which currently consists of nine members, makes decisions on exclusions. The Norwegian sovereign fund, led by CEO Nicolai Tangen, is the world’s largest of its kind and has overseen where Norway pours its investments over the last 27 years. It has emphasized responsible investment when backing companies. 

The fund owns the equivalent of 1.5% of all shares in the world’s listed companies, with holdings in nearly 9,000 of them. It posted a record 2024 profit of $222 billion, thanks to the strong performance of tech stocks.

New world order, new Norwegian investments?

European Commission President Ursula von der Leyen characterized the security landscape in Europe as “momentous and dangerous” last month.

Europe has witnessed a series of recent events that have put geopolitics and security front and center, whether that’s Russia’s invasion of Ukraine in 2022 or President Donald Trump signaling that the U.S. might not protect allies the same way it previously did. This has forced a rethink in the Norwegian government’s hesitation to park money in the defense sector.  

“It’s hypocritical. We are a Nato member, we are very dependent on the security that the US can give us. We buy equipment from the same companies but we can’t invest in them,” Hans Andreas Limi, MP of the Progress Party, one of the opposition parties, said in an interview with the Financial Times.

Faced with these shifts, Europe has proposed a $840 million rearmament plan that will strengthen the continent’s security and reduce its reliance on transatlantic favors. As the demand for defense grows, increasing production would be an “extraordinary effort” given the “barebones stockpiles” of today, an analysis by Brussel-based think tank Bruegel found.

If the rearmament plan were to be implemented, countries in the 27-member European Union, which Norway has long been vying to join, would have to ramp up defense spending to 1.5% of their GDP on average.

Bru pointed out to Fortune that the restrictions on weapon investments are outdated, given that they were drafted in 2004 when the geopolitical landscape was very different. 

Shares in defense companies BAE Systems and Rheinmetall, both of which are on Norges Bank’s exclusion list, have rallied 35% and 115% year-to-date, respectively. 

Representatives at Norges Bank declined Fortune’s request for comment.

This story was originally featured on Fortune.com