The world's largest sovereign wealth fund is poised to upend its ethical investment rules. A review submitted last week by the independent Gjedrem committee recommends that Norges Bank Investment Management (NBIM) drop its ban on Western defence companies. This shift would unlock exposure to heavyweights like Boeing, Airbus, BAE Systems, and Lockheed Martin, which have been excluded for years due to the fund's prohibition on nuclear weapons manufacturing.
The logic is geopolitical, not just financial. The committee argues NBIM must prepare for conflicts escalating into war. Under the proposed change, the nuclear weapons criteria would remain but with a critical tweak: companies domiciled in nuclear-weapon states that are allied with Norway could be reincluded. This effectively clears the path for US and European defence contractors currently barred from the fund's portfolio.
NBIM already holds defence stakes, but they are limited. The fund owns a 2.3% stake in Germany’s Rheinmetall and a 1.5% stake in Italy’s Leonardo. However, the exclusion of major Western players has been a persistent point of contention, especially after the fund exited positions in Caterpillar and five Israeli banks last September. That move drew sharp criticism from the US State Department, which called the disinvestments based on "illegitimate claims."
The committee also proposes removing the requirement to assess if arms manufacturers' products are used in violation of international humanitarian law. Instead, the fund should focus on investing in weapons Norway needs for its own defence. The Council of Ethics will continue to operate but will no longer advise NBIM on taking specific action over ethical concerns.
This isn't immediate. The current guidelines remain in force until Norway's parliament votes on the new framework, expected sometime in mid-2027. The Finance Ministry will first propose the new ethics framework in a white paper this spring. For now, traders and long-term investors watching global defence equities should note the potential for a massive reallocation of capital from the world's largest institutional investor.