Norwegian pension fund blacklists Petrobras

OREANDA-NEWS. June 24, 2016. Norway's largest pension fund KLP has excluded Brazil's state-controlled Petrobras from its investment portfolio because of its involvement in a colossal corruption investigation, another blow for the beleaguered oil firm.

KLP, which manages around NOK 553bn (\\$67bn) in assets, says despite Petrobras' initiatives, "there is an unacceptable risk of future corruption within the company."

Petrobras says KLP already notified it of the decision and it has started to share more information with KLP about its efforts to strengthen its governance to avoid fraud and corruption risks.

KLP's decision comes as Petrobras is looking to attract funds necessary to keep its more modest upstream growth targets on track. Petrobras is expected to release a diluted five-year business plan, covering 2016-2020, in the coming months.

After years of costly government interference, Pedro Parente, Petrobras' new chief executive, says the firm is now committed to decision-making based on its own interests.

Earlier this week, the Senate passed a bill that tightens criteria for board members of state-controlled companies, such as Petrobras, and excludes politicians from being appointed. The legislation, which should be signed into law by interim president Michel Temer next week, is considered an important step in the fight against corruption.

But the ongoing two-year-old Lava Jato investigation continues to weigh on investors' perception of Petrobras. The company has taken several steps to tighten oversight, but some say there is more to be done.

Jeanette Bergan, head of responsible investment at KLP, says there are several initiatives it would like to see the company take, including an investigation "into potential corruption in its operations outside Brazil (the company has operations in many countries in which the risk of corruption is exceedingly high), a robust and tailored anti-corruption training programme, due diligence investigations of suppliers, a strengthening of the board and executive management's anti-corruption competence, and a tone from the top in line with the company's anti-corruption commitments."