Norges Bank will increase its cooperation with the Council on Ethics, including sharing newly developed artificial intelligence (AI)-based monitoring tools, in light of the scrutiny facing the Government Pension Fund Global (GPFG) over its Israeli investments.

In a letter to the Ministry of Finance on 18 August, the bank said the scope of coordination work with the council had increased significantly in recent years, and that it would assess possible measures to strengthen this work further “to better utilise combined resources”.

It said its investment management arm had recently strengthened the analysis tools for risk assessments, including through expanded use of AI, and that it would ensure the Council on Ethics could also benefit from these tools, “especially in acute or heightened situations”.

The bank also stated that it would review its procedures in all areas of its work on observation and exclusion, and assess measures to further strengthen the process for handling recommendations from the Council on Ethics.

The letter was sent in response to correspondence from the Ministry of Finance earlier this month instructing Norges Bank and the Council on Ethics to review the GPFG’s Israeli investments.

It also set out a history of the fund’s governance work in Israel – the first exclusions in the West Bank date back to 2009 – and more recent work undertaken to review Israeli investments. For example, deeper analyses have been conducted of the GPFG’s exposure to areas in war and conflict since 2024.

Norges Bank Investment Management (NBIM) also monitors new companies that enter the investment portfolio daily and, since 2024, has required external managers to gain approval to make investments in Israeli companies not included in the portfolio. Not all new companies assessed received such approval, Norges Bank said.

The letter reiterated review work on specific Israeli holdings first outlined at last week’s press conference, including reviews that began in 2024 using multiple data sources.

“The companies are classified in these reviews as low, medium or high risk. All companies that have been assessed as high risk have either been sold or assessed by the Council on Ethics. In 2024 and up to summer 2025, Norges Bank Investment Management had sold 10 smaller Israeli companies," it read.

One such case was Bet Shemesh Engines Holdings. NBIM CEO Nicolai Tangen admitted last week the company was rated as medium risk in May but should have been classed as high risk. The fund has since divested.

“Given the information that has now emerged, the company would have been assessed as high risk. With a broadly invested global portfolio, there will always be a risk that information is not captured early enough, or that we make assessments we, in hindsight, would have made differently,” the letter stated.

The NOK 18trn sovereign wealth fund has also moved to insource management of its Israeli equity portfolio, which had previously been run by external managers. As part of this change, it sold 11 companies outside its benchmark index.

As at 14 August, the fund’s investments in Israel stood at NOK 19bn across 38 companies, down from NOK 34bn across 56 companies in the benchmark index at the end of June.

Norges Bank emphasised that while individual holdings may be linked to controversial activities, the fund’s mandate requires it to remain broadly invested. It said strengthening cooperation with the council and using new monitoring tools would help manage the risks of operating in increasingly complex markets.

In its concluding remarks in its response to the Ministry of Finance, Norges Bank said it “agrees” with the assessment by the Ministry.

“We will continue to strengthen our work on responsible investment and due diligence, including use and follow-up of external managers, risk management, ownership exercise and cooperation with the Council on Ethics,” Norges Bank wrote.

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