The Swedish pension funds' move follows a decision last year by Norway's state pension fund to drop Elbit Systems from its investments on similar reasoning.

The work of the Ethical Council is based on a rigorous process where dialogues with companies are our main tool, said Annika Andersson, chair of the Ethical Council. As a last resort, the Ethical Council may recommend each fund to exclude the company if the dialogue fails to produce the desired result. This is now the case with Elbit Systems Ltd.

The Swedish buffer funds ensure the long-term stability of the country's pay-as-you-go pension system by attempting to even out temporary fluctuations during periods when pension contributions are not sufficient to cover pension disbursements.  

The Swedish pension scheme also considered divesting from Yahoo, PetroChina, the Spanish Grupo Ferrovial and the French electronics firm Thales over various ethical concerns, but determined that the companies successfully addressed their ethical concerns.

The Council uses dialogue and cooperation as its main tools for influencing companies to act responsibly, the Ethical Council said in a statement. The discussions have two aims: encouraging companies to address violations of international conventions and to implement proper systems to prevent future abuses... These discussions were ongoing for a couple of years and resulted in satisfactory improvements in each case.