UPDATE 1-Norway oil fund to sell holdings on environmental concerns


(Corrects to show that Shell and ENI not placed on formalobservation)

* Norway often bars sovereign wealth fund from investments

* Asks for greater scrutiny of Shell and Eni in Niger Delta

* Fund will also raise concerns with AngloGold

OSLO, Oct 14 (Reuters) - Norway's government has told its$790 billion oil fund to sell holdings in five companies becauseof environmental issues and expressed concern over others,including Shell and Eni, the finance ministry said on Monday.

The fund, the world's largest sovereign wealth fund, isbarred from investing in WTK Holdings Berhad, Ta AnnHoldings Berhad, Zijin Mining Group andVolcan Compania Minera because their activities posea "risk of severe environmental damage", it said in a statement.

But contrary to the recommendation of its Ethic Council, thegovernment did not place Royal Dutch Shell and Eni on its watch list for possible exclusion and insteadasked the fund to place a greater emphasis on scrutinising theiractivities in the Niger Delta.

"The Ministry of Finance has decided to ask Norges Bank toinclude oil spills and the environmental conditions in the NigerDelta in its ownership efforts for a period of between five andten years," the ministry said.

India's Zuari Agro Chemicals Ltd was also excludedfrom the investment list "based on an assessment of the risk ofcontributing to the worst forms of child labour", it said.

The fund usually sells its stakes in companies before thegovernment makes its exclusion decision public.

It often excludes companies and has dozens of tobacco andweapons makers on its veto list. Some of the world's biggestminers, such as Rio Tinto and Barrick Gold are banned as they have badly damaged the environment.

The government also asked the fund to raise issues aboutmining related environmental damage with AngloGold Ashanti but has not excluded the firm from its investment list,despite such a recommendation from its ethics council.

"We do have an ongoing dialogue with these companies andwe've had for along time, over the past two years... and they'veshowed good results," oil fund spokesman Thomas Sevang said.

"We think that exercising our ownership rights is creatingpositive change," he said.

The companies involved could not immediately comment orcould not immediately be reached for comment. (Reporting by Balazs Koranyi; Editing by Louise Ireland andDavid Goodman)

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