Norway's $2.3 trillion sovereign wealth fund, the largest in the world, could soon end its self-imposed ban on investing in Western defence companies that has lasted years. The fund currently has stakes in around 1.5% of the publicly listed companies globally, making it one of the biggest investors in the global stock market.
Last week, an independent Gjedrem committee submitted a review to Norway's Finance Ministry, which included a recommendation for a radical change to how the fund approaches defence investments. It argued that Norges Bank must be prepared for situations where conflicts escalate into war.
The review was ordered in November 2025, after controversy broke out over some disinvestments from some Israeli and US-based firms. Norges Bank has not invested in western defence companies for years as their current ethical rules prohibit them from making investments in companies such as Airbus, BAE Systems, Boeing, BWX Technologies and Lockheed Martin, as they contribute to the manufacturing of nuclear weapons.
It is not as if the fund does not invest in defence stocks at all. It does have a 2.3% stake in Germany's Rheinmetall, and a 1.5% stake in Leonardo, listed in Italy. As per the Gjedrem Committee recommendation, although the nuclear weapons criteria should be retained, its scope could change.
The Fund is not to be invested in companies that produce nuclear weapons, unless the company is domiciled in a nuclear-weapon state under the Treaty on the Non-Proliferation of Nuclear Weapons that is allied with Norway. Several European and American companies that produce components for nuclear weapons can therefore be reincluded.
According to the recommendations, the fund should invest in companies producing weapons that Norway needs for its own defence, and also proposed to remove the requirement for arms manufacturers to be assessed for whether their products are being used by countries in accordance with international humanitarian laws.
Apart from the rising geopolitical risks, the committee believes that given the fund's capital and influence, it was time to reassess the ethical framework. Norway's oil fund was set up in the 1990s to invest the windfall from the country's oil and gas industry.
Investment decisions are made by Norges Bank Investment Management , which also holds stake in many Indian listed entities. In September last year, controversy broke out after the NBIM ordered exiting positions in American machinery manufacturer Caterpillar and five other Israeli banks, which prompted the US state department to retort by saying that it is "very troubled" by the decision of the fund, which, as per them, was based on "illegitimate claims."The committee also recommended that the Council of Ethics must continue to operate but no longer advise NBIM on taking action over ethical concerns.
Norway's Finance Ministry will now propose a new ethics framework in a white paper during spring, and Norway's parliament is expected to vote on the new proposed framework sometime in mid-2027. Till then, the current guidelines remain in place.