Sweden's state-managed funds have announced that they will divest their holdings in Walmart, Freeport McMoRan, Incitec Pivot and Potash due to ethical concerns.

AP1-AP4 have all decided to exclude the companies after being advised by their Ethical Council that several years of engagement with the companies had failed to deliver the desired results.

A statement from the funds said that the Ethical Council has chosen to terminate the dialogue after a "detailed analysis" of the four companies, as it has been unable to achieve its objectives, and it recommended each fund to exclude the companies' shares from their investment portfolios.

Christina Kusoffsky Hillesoy, chairman of the Ethical Council, said: "Engagement is the Ethical Council's primary too for encouraging companies to act responsibly. Exclusion from the investment portfolio is a last resort when other avenues have not worked.

"This is therefore a setback for us in so far as we have been unable to secure lasting improvements despite several years of active engagement. We do not believe further interaction with these companies will be fruitful and have therefore recommended that the AP funds exclude them from their investment universe."

With regards to Walmart, the Ethical Council said that its recommendation is based on the fact that the company in its US business is linked to systematic abuses of workers' right, in breach of the International Labour Organization's core convention on working rights, and that the company denies employees their right to form and join trade unions.

The Ethical Council said it has tried to engage with Walmart on these issues ever since it was formed in 2007, but the council said that continued dialogue with Walmart will not be fruitful, because the company has not changed its view on workers' rights.

In July this year, Dutch fund PGGM announced that it added Walmart to its exclusion list because of its "tense labour relations" in the US and because the Walmart board was not willing to engage with shareholders.

First published 02.10.2013

monique_simpson@wilmington.co.uk