Norges Bank, the central bank of Norway, announced Tuesday that it’s excluding China’s Luthai Textile from the country’s trillion-dollar Government Pension Fund Global (GPFG) due to an “unacceptable risk of serious or systematic human-rights violation.”
The world’s largest sovereign wealth fund, GPFG, also known as the Oil Fund, had a 0.57% stake worth $5.7 million in Luthai, which produces and distributes middle- and high-grade yarn-dyed fabric and dyeing fabric for shirts and garments for the Chinese and overseas markets.
Luthai operates textile factories in several countries, including Cambodia and Myanmar, where workplace investigations have uncovered the use of underage workers toiling under the same conditions as adults, hazardous work environments and restrictions on organizational freedom, according to Norges Bank’s Council of Ethics, which recommended the exclusion.
“Luthai previously seems to have implemented few measures that provide permanent improvements in working conditions,” the council said. “Combined with the fact that Luthai does not want to give insight into how the company operates, the council concludes that there is an unacceptable risk that Luthai will be responsible for systematic human-rights violations in the future.”
The Norges Bank executive board is also placing Taiwan’s Nien Hsing Textile under observation, also based on a recommendation from the Council on Ethics, for an “unacceptable risk of serious systematic human-rights violations.”
Similar investigations into Nien Hsing, which manufactures denim fabrics and garments, revealed widespread sexual harassment of female employees by managers and supervisors at one of its factories in Lesotho in southern Africa. Other red flags included occupational health and safety issues, along with the possibility that Nien Hsing is restricting freedom of association for workers, the Council of Ethics said.
It hasn’t recommended that the company be excluded from investment by the GPFG entirely because Nien Hsing is “currently implementing changes and measures which could improve working conditions, even though their implementation so far has been weak,” the council said. It’ll be monitoring developments at Nien Hsing, however, and if the most serious violations are not curtailed within a reasonable window, the council will consider advising Nien Hsing’s exclusion.
Norges Banks holds a 1.8% stake in Nien Hsing, the equivalent of $3.57 million in shares.