PKX POSCO Holdings Inc

OSLO—Norway's sovereign-wealth fund, the world's biggest, said Monday that it would exclude four companies from its investment portfolio on concerns that the companies could create severe environmental damage as they convert tropical forest into palm-oil plantations.

The exclusions include South Korea's Posco and Daewoo International Corp. as well as Malaysia's IJM Corp. Bhd and Genting Bhd, the fund said.

The Norwegian central bank manages the $880 billion fund on behalf of the government. This is the first time the bank's executive board has made a decision to exclude companies from investment after it took over responsibility for the fund's ethically based exclusions on Jan. 1. The decisions were previously made by the country's Ministry of Finance.

The decision was based on a recommendation from the fund's Council of Ethics. The council had recommended that Daewoo and its parent company Posco be excluded "due to an unacceptable risk that the companies are responsible for severe environmental damage as a result of conversion of tropical forest into oil palm plantations."

The council's recommendations to exclude IJM and Genting were also related to the risks of converting tropical forest to palm-oil plantations, it said.

The excluded companies couldn't be immediately reached for comment.

"Before deciding to exclude a company, Norges Bank shall consider whether the use of other measures, including the exercise of ownership rights, may be better suited," the central bank said. "The executive board concludes that it is not appropriate to use other measures in these cases."

The fund has previously excluded more than 60 companies for reasons including the production of land mines, tobacco or nuclear weapons, the violation of human rights, or the risk of severe environmental damage.

At the end of 2014, the fund held $198.1 million in Posco shares, equal to a 0.91% stake. It held $9 million in Daewoo, or a 0.28% stake, and $46.0 million in IJM, equal to a 1.64% stake, and the fund's Genting shares were worth $40.8 million, a 0.43% stake.

Write to Kjetil Malkenes Hovland at kjetilmalkenes.hovland@wsj.com

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(END) Dow Jones Newswires

August 17, 2015 09:05 ET (13:05 GMT)

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