Norway Refuses to Assess NBIM’s Financial Link to Forced Labor

NBIM urged to exclude Daewoo International for profiting from forced labor

Six months after receiving a complaint that Norges Bank Investment Management’s holdings of Daewoo International supports forced labor, Norway’s National Contact Point (NCP) for the Organisation for Economic Cooperation and Development (OECD) decided to close the complaint without further examination. After Norway’s decision to ignore the issue of forced labor in Uzbekistan, the Cotton Campaign, Korean Transnational Corporation Watch and Anti-Slavery International call on NBIM to make its own decision and add Daewoo and its parent company Posco to NBIM’s list of companies excluded from investment consideration due to human rights violations.

The complaint presented evidence of systematic forced labor in the cotton sector in Uzbekistan, Daewoo International’s repeated admissions that it uses the forced-labor cotton for its Uzbek operations, and NBIM’s investment in Daewoo. The complainants asked the Norwegian NCP to facilitate mediation with NBIM, assess the facts and determine any breaches of the OECD Guidelines for Multinational Enterprises. As an OECD member state, Norway has a duty to work proactively to ensure that Norwegian companies “identify, prevent, and mitigate” “actual and potential” human rights violations that are linked to their operations, products, or services even when the companies have not “contributed to” or caused the human rights violation.”

The Norwegian NCP stated that it rejected the complaint because, in its view, accepting it would not contribute to the purpose or effectiveness of the OECD Guidelines. It did not define its definition of the Guidelines’ purpose or address that NBIM owns shares of Daewoo, which knowingly benefits from and supports forced labor. Instead the NCP stated it recently considered a similar case and that an OECD working group is studying the due diligence responsibilities of minority shareholders.

With its decision, Norway not only ignored the merits of the case but also created a new barrier to using the NCP. Rejecting cases that are similar to recently reviewed cases unnecessarily reduces the accessibility of the NCP mechanism. The Norwegian NCP’s rejection of this case also reverses its previous acceptance of a similar case, in which it upheld the obligation of investors under the Guidelines, thereby eroding predictability of the NCP process. Furthermore, the OECD has confirmed “Financial institutions, like any other MNEs, should thus avoid causing or contributing to adverse impacts, and seek to prevent or mitigate those impacts when their operations, products and services can be directly linked to them by a business relationship.”

The NCP’s decision to reject the case means NBIM and the complainants do not have access to mediated dialogue. Notably, NBIM’s policy is to exclude companies when there is an unacceptable risk that the company contributes to or is responsible for systematic human rights violations, including forced labor. Yet despite abundant evidence of forced labor in the cotton sector in Uzbekistan, NBIM maintains shares of Daewoo.

Daewoo International and Posco are not only at risk of contributing to forced labor but have repeatedly admitted to purchasing and using forced labor cotton in their operations in Uzbekistan. Daewoo International is one of the largest buyers of forced-labor cotton in Uzbekistan and, since the 1990s, has expanded from one to three cotton processing companies in country, Daewoo Textile Fergana, Daewoo Textile Bukhara, and Global Komsco Daewoo. In return, the Uzbek government provides Daewoo discounted cotton prices, tax incentives and preferential loans. The KTNC Watch and the Cotton Campaign have engaged Daewoo and its parent company Posco directly since 2012. The companies have steadfastly refused to cease purchasing forced-labor cotton and to conduct independent human rights monitoring of its supply chain in Uzbekistan. Kommunal Landspensjonskasse (KLP) excluded Posco and Daewoo precisely “because they buy cotton from Uzbekistan, which represents an unacceptable risk of KLP contributing to violations of both human rights and labor rights.”

Therefore, we urge NBIM to exclude Daewoo International and Posco from its investment universe.