Mining company Rio Tinto has been given a severe dressing down by the Norwegian government, which is ditching its shares in the company due to its environmental record.

Norway’s ministry of finance has sold all the shares the government pension fund has in the company, worth nearly 5 billion Kroner (over $800 million). This amounts to nearly half a percent of the market capitalisation (Reuters).

“Exclusion of a company from the Fund reflects our unwillingness to run an unacceptable risk of contributing to grossly unethical conduct,” says (government statement). “The Council on Ethics has concluded that Rio Tinto is directly involved, through its participation in the Grasberg mine in Indonesia, in the severe environmental damage caused by that mining operation.”

The statement adds, “There are no indications to the effect that the company’s practises will be changed in future, or that measures will be taken to significantly reduce the damage to nature and the environment.”

The government cites the huge amount of tailings from the Indonesian mine that discharge into the nearby rivers as a key concern. It puts the amount at 230,000 tonnes per day and says this will increase in future.

Rio Tinto said it was “surprised and disappointed” by the government’s move and claims a “very good record in its environmental performance”. The company also says it does not own the Grasberg mine but owns a 40% stake in it and cooperates with the operator Freeport McMoRan in running it.

“We are confident that all steps have been taken to ensure that the mine is operating satisfactorily from an environmental viewpoint and this has been borne out by regular audits,” says a statement from the company.

Mark Robertson, of the Ethical Investment Research Service told the Independent, “Norway’s decision does send a strong signal, and could be an effective driver for change. Other investors do look to that fund as a leader in responsible investment. I wouldn’t understate the impact.”

Forbes notes:

The [Norwegian government] fund has a track record of excluding corporations on ethical grounds. It has left out firms that produce nuclear arms or cluster munitions and groups deemed to have caused environmental damage or human rights’ abuse. Other blacklisted firms include BAE Systems and Wal-Mart.

Image: Grasberg mine from space / NASA