Companies engaging in unethical practices - including polluting, corruption and human rights abuses – could soon face divestment.

Norway's near $1 trillion sovereign wealth fund is preparing to exclude itself from or add to a watch list, firms in the oil, cement and steel industries for emitting too much greenhouse gas.

Carbon emissions have been added as a criteria for the fund which contains the proceeds of Norway’s nationalised oil industry.

The fund is mandated to operate under ethical guidelines set by parliament.

This single fund controls 1.3 per cent of the world’s listed equity - investing in 9000 different firms - giving it considerable weight among other investors.

Johan Andresen, chair of the fund's independent Council on Ethics, acknowledges there is a strange “duality” in a fund based on oil divesting over emissions.

He says the measures could extend to other firms in the defence, telecoms and arms industries and other kinds of corruption.

Mr Andresen says the first recommendation on emissions should be ready by July.

“It will be a company either in the oil or concrete industry ... We have to start with the worst and make our way through the industries,” he said.

The ethics panel also looking into the risk of corruption in the pharmaceuticals sector and investigating possible human rights abuses among recruitment firms in the Gulf States — including one “well known Western” firm.

The ethics board has only been around since the early 2000s, but already excludes 69 companies based on their dependence on thermal coal, and 65 other firms for various reasons.

When it pulls out of an investment, the Norwegian oil fund sells shares gradually before any announcement, but even so, being dropped often damages a company's investment image.

After a three-year study into the risk of corruption in the telecoms, defence and energy industries, the council recommended the central bank either exclude or observe companies in these sectors.

“They have the same type of risk elements: large contracts, government as a counterpart, lack of transparency/desire to keep things secret and a large number of middlemen,” Mr Andresen said.

“When you add them, they constitute a greater risk of corruption.

“The pharmaceuticals industry has the same elements of risk. We have received indications that there is a risk of corruption. We have enough indications to take a strong look.”

The council is also aware of reported slave conditions for North Koreans employed by companies in Eastern Europe, and of rights abuses in work in the Gulf States.

Mr Andresen said the bank is in talks with the unnamed Western company involved.

“I am hopeful that they see it in their interest to change their practices and that it may be an impetus for other companies to follow. It is a well-known actor. It would be a great signal to others that this practice ended.”

He said there has been progress in the wake of reports of abuse in Qatar and other Gulf states.

“Authorities in Qatar have issued new regulations forcing companies to better their practices, with more decent living and working conditions and the ability for a worker to keep his/her passport,” he said.

“I had anticipated a larger number of exclusions, but several companies show some progress.”