Stockholm (NordSIP) – The issue of companies’ responsibility for the end-use of their products has been brought to light with the announcement by Norway’s KLP that it is blacklisting heavy equipment manufacturer Caterpillar. Citing human rights concerns, the €91 billion public sector occupational pension scheme decided to exclude Caterpillar inc. from the investment portfolios of KLP and KLP Funds. Prior to the 17 June 2024 divestment, the KLP group held shares in the US firm worth approximately €63 million.
According to Kiran Aziz, Head of Responsible Investments at the group’s asset management arm KLP Kapitalforvaltning, the main issue relates to the use of Caterpillar bulldozers by the Israeli Defense Force (IDF) in Gaza and the West Bank. In explaining KLP’s decision, Aziz highlighted the modifications made to the bulldozers by the local Israeli importer. This involves rebuilding the machines to incorporate vehicle-mounted weaponry and armoured drivers’ cabs. Roughly 100 of these modified bulldozers are reportedly being used in Gaza.
Although Caterpillar does not sell the vehicles directly to the IDF, KLP raised the issue of human rights and international law violations resulting from the use of its products with the firm over a dialogue lasting several months. “Although Caterpillar has shown itself willing to engage in a dialogue with KLP, the company’s responses failed to credibly substantiate its ability to actually reduce the risk of violating the rights of individuals in situations of war or conflict, or of violating international law,” explains Aziz.
KLP sets out the basis for its exclusion of Caterpillar from the investment portfolio in a written statement that cites the UN charter, the Fourth Geneva Convention, and rulings by the International Court of Justice (ICJ) regarding the illegality of Israeli settlements in the occupied territories. KLP also stresses that this position is supported by the Norwegian government. KLP also points to expectations on companies with respect to human rights as laid out in the UN’s Guiding Principles on Business and Human Rights and the OECD Guidelines for Multinational Enterprises. Commenting on the exclusion announcement, Aziz said: “For a long time, Caterpillar has supplied bulldozers and other equipment that has been used to demolish Palestinian homes and infrastructure to clear the way for Israeli settlements. It has also been alleged that the company’s equipment is being used by the Israeli Defence Force (IDF) in connection with its military campaign in Gaza following the Hamas attack on 7 October last year. Since the company cannot provide us with assurances that it is doing anything in this regard, we have decided to exclude the company from investment.”
Aziz is a firm believer in asset owners publicly calling out investee companies that are considered to violate international norms, and calls out for peers to follow KLP’s lead. Writing in Al Jazeera, Aziz elaborates on KLP’s engagement strategy: “When we blacklisted companies producing controversial weapons globally such as Elbit, Rolls-Royce and Thales, and when we pulled out of Russian companies, and Adani over its role in Myanmar, we were also vocal. There is no excuse to be silent over the role of companies linked to Israel’s illegal actions in the occupied territory and its war in Gaza. Blacklisting Caterpillar and others linked to illegal settlements should become the norm for pension funds who claim to care about human rights.”
