The activist fund manager with assets worth $1.3 trillion in global markets held a 2.8% stake in UPL as of December 31, 2021 and is the largest foreign institutional investor in the company. It is also the company’s second largest institutional shareholder after Life Insurance Corporation (LIC) which owns 10.5% of the company, according to ESB data.

In response to a question from ET, a spokesperson for Norges Bank Investment Management – the fund’s investment manager – said: “The aim of our dialogue with UPL is to reduce the use of child labor in its subsidiary Advanta Seeds Pty Ltd, which produces various types of seeds in India.

Norges said he had “regular contact” in 2021, including two meetings with representatives of UPL and Advanta. “The companies continued to develop and improve their information campaigns during the year and updated their policies and contracts with farmers.”

UPL told ET that the company does not encourage child labor.

“This unfortunate practice referred to relates to child labor by a small pocket of farmers in India, on their respective farms that Advanta Seeds works with,” a company spokesperson said. “To counter and prevent such practices, UPL has launched the United Against Child Labor project in India, a proactive initiative to eliminate all forms of child labor on seed supplier farms and ensure the education of all children.

The UPL said it had “informed” more than 3,500 seed growers over the past three years against child labour. The company recorded revenue of ₹38,694 crore and net profit of ₹2,871 crore for the financial year ended March 31, 2021.

Sovereign wealth funds are government-sponsored investment vehicles that invest accumulated cash reserves in overseas assets. The Norwegian fund led by Norges Bank has been at the forefront of shareholder activism, pushing for better compliance with environmental, social and governance (ESG) standards. More recently, the fund announced that it would sell its entire $2.83 billion portfolio investment in Russia following its war with Ukraine.

The use of child labor is seen as a red flag by militant institutional investors, as the practice is seen as a violation of human rights internationally. In India too, there are strict laws against child labor.

Norges Investment Management first became aware of the case in 2018 when Norges Bank – the parent company of the investment manager – asked them to raise the issue of child labor with UPL.

Norges Bank Investment Management said UPL and Advanta commissioned an external evaluation with field surveys of child labor in seed production, which had “promising results”.

“They (UPL and Advanta) have prioritized improvements to supply chain monitoring, including new tools and staff training,” Norges said in its response to ET.

In 2016, Norges Bank decided to exclude 52 global coal-based companies from its investment portfolio citing negative environmental impact. Domestic companies that were on this exclusion list included Coal India, Gujarat Mineral Development and NTPC.