Norwegian wealth fund could soon be allowed to invest in defense giants

Norway’s $2.3 trillion oil fund, which has been frozen from much of the sector for years by state ethics guidelines, could soon invest in Western defense companies.

The sovereign wealth fund is currently worth around NOK 21.8 trillion, or $2.3 trillion, making it the largest fund of its kind in the world. The fund owns approximately 1.5% of the world’s publicly traded companies, making it one of the largest investors in stock markets around the world.

A review of Norges Bank’s ethical guidelines governing how it invests was ordered in November 2025 following controversy over divestments from some Israeli and American companies.

On Thursday, the independent Jedrem Commission submitted its findings to the Norwegian Ministry of Finance. They included recommendations for fundamental changes to the fund’s approach to defense investments, arguing that “Norges Bank must prepare for situations in which conflicts escalate to war.”

Current ethics rules prohibit funds from investing in companies that: airbus, BAE Systems, boeing, BWX Technologies and lockheed martinbecause it contributes to the production of nuclear weapons. The fund holds some defense stocks, including a 2.3% stake in Germany. line metalholds 1.5% of Italian shares leonardo.

The Jedrem Commission said on Thursday that standards for nuclear weapons should be maintained, but “their scope should be changed.”

“The fund must not invest in companies that manufacture nuclear weapons unless they are based in a nuclear-weapon state under the Treaty on the Non-Proliferation of Nuclear Weapons (NPT) with which Norway is an ally,” the report said. “Therefore, some European and American companies that manufacture components for nuclear weapons could be included again.”

The report added that potential investments should include companies that produce the weapons Norway needs for its defense, and proposed removing the requirement for weapons manufacturers to assess whether their products are used by states in accordance with international humanitarian law.

The commission said the fund’s capital and influence, along with rising geopolitical instability, wars in the Middle East and Ukraine, and concerns about energy security, meant “it is time to reassess its ethical framework.”

“The size and scope of the fund provides greater access to corporate management and boards of directors than in 2003,” the report said. “This is an opportunity for management to take advantage of as the political climate overseas becomes more challenging.”

“The liberal, rules-based international order is in decline,” he added. “Economic policy is increasingly being used as an instrument of foreign policy. In recent years, cooperation between states has become more transactional and negotiation-driven.”

It warned that such an environment could make it easier for other governments to “recognize ethically motivated exemptions as Norwegian government policy.”

The Norwegian Oil Fund was established in the 1990s to invest profits from the country’s oil and gas industry. While the Norwegian Ministry of Finance and the Central Bank are involved in the fund’s governance, investment decisions are made by Norges Bank Investment Management (NBIM) and exclusion recommendations have historically been proposed by its independent Ethics Council.

“There was a threat of reaction or countermeasures,” the Jedrem commission said in its report Thursday. “Retaliatory measures could hurt the Fund and other Norwegian interests.”

Last September, the U.S. State Department told CNBC that it was “deeply troubled” by NBIM’s decision to exit its positions in U.S. machinery maker Caterpillar and five Israeli banks, accusing the fund of basing its decision on “unreasonable claims.”

At the time of the sale, NBIM cited an “unacceptable risk” that both companies were complicit in rights violations in the Palestinian territories. Norwegian Finance Minister Jens Stoltenberg, a former NATO Secretary-General, said at the time that this was “not a political decision.”

The Jedrem Committee noted on Thursday that with public finances under greater pressure in many countries, the risk of further backlash against the NBIM’s investment choices is also increasing.

The report warned that “high government debt could threaten the economic stability of countries, but it could also provide incentives for foreign investors to rely on interest and dividend income as a national revenue base.”

Committee members concluded that while the guidelines supporting the Fund’s ethical framework remain widely supported, they are under pressure from a political background.

“Particularly in the United States, the conditions for exercising ownership rights are more restrictive,” they said.

The Jedrem Committee recommended that the Ethics Council should continue to operate but should not advise NBIM on taking action on ethical concerns. Instead, it should be limited to providing analysis of violations of ethical guidelines by companies, the commission added.

Although no new companies will be immediately included or removed from the Fund’s portfolio as a result of the report’s recommendations, the recommendations do pave the way for the Fund to invest in certain U.S. and European defense companies that are currently prohibited by the Fund’s Code of Ethics.

Norway will now hold a public consultation on the report’s recommendations, and the central bank is expected to submit a response in January. The Ministry of Finance is expected to propose a new ethics framework in a white paper in the spring, and Norway’s parliament is expected to vote on the changes in mid-2027.

Until then, the Fund’s current ethical guidelines and exclusion framework will remain unchanged.

“The Ethics Council has just received the Gedrem Commission’s report,” Svein Richard Brantseg, chairman of the wealth fund’s Ethics Council, said in an emailed statement on Thursday morning. “We will consider the report carefully. We will then have a thorough discussion within the board and submit a response at a future public consultation.”

The Norges Bank board has until November 2025 to decide whether to remove the company from the fund’s investment portfolio or place it on a watch list. These decisions were informed by the Ethics Council, an independent body appointed by the Norwegian Ministry of Finance.

However, temporary guidelines have been introduced that prevent Norges Bank from making such decisions, pending the review by the Jedrem Commission. The interim guidelines provided that boards could only reverse previous decisions to remove a company or place it on a watch list.

Meanwhile, the Ethics Council has been stripped of its power to recommend observations or exclusions, at least until a review of the ethics framework is completed.

The interim guidelines will remain in place until a 2027 parliamentary vote on the Jedrem Commission review.

The Jedrem Commission’s report received a backlash from some human rights groups who argued that decisions taken in Norway could influence international investment trends.

Amnesty International Norway Executive Director Jon Peder Egenes said in a statement Thursday that the proposal “risks undermining accountability and integrity and dismantling key human rights protections.”

“If the world’s largest sovereign wealth fund changes its standards, the impact will go far beyond Norway’s borders,” he said. “Other investors are paying attention, and companies are taking notice.”

Grete Herlovsson, general secretary of the Norwegian Red Cross, said in a statement that investing in nuclear weapons manufacturers is “totally incomprehensible both ethically and humanely.”

“Opening up investment in nuclear weapons would be a dangerous shift that would weaken international prejudice against these weapons and strengthen the perception that nuclear weapons are acceptable weapons,” she said. “This increases the risk of them being used.”