Pressure Campaigns Gain Steam With Investors
Campaigns to pressure investors in North America to drop holdings in companies involved in some of the world’s trouble spots appear to be gaining traction after one of the biggest money managers sold stakes in oil companies with links to Sudan, where some estimate 300,000 people have died in the Darfur region since conflict broke out there in 2003. The move by New York-based TIAA-CREF follows the passage by the US House of Representatives in October of a bill making it easier for fund managers to sell holdings in companies with assets in Iran as part of a strategy to persuade Tehran to halt its nuclear program and drop support of terrorism. Last June, New York State Comptroller Thomas DiNapoli drew praise from pressure groups after selling $86 million in nine companies doing business in Iran and Sudan. European funds are also taking action. Swedish national pension fund AP7 early last year excluded Paris-based power company Alstom from its portfolios because of its involvement in Israel’s occupation of Palestinian land, while back in 2006, Denmark’s ASN Bank became the first bank in the world to divest from companies benefiting from Israeli occupation of Palestine by selling out of industrial services giant Veolia, which was involved in a light rail project in Israel. The actions signal a widening of political sensitivity about investments in troublesome regions beyond niche ethical funds.
“We’re increasingly seeing investors make the link between their investments and problematic regimes,” says Melany Grout, director of Conflict Risk Network (CRN), a group of investors seeking to mitigate conflict risk and increase responsible foreign investment. While CRN’s work so far has focused on Sudan, it is broadening its horizons to other countries affected by severe conflict.
TIAA-CREF, with over $402 billion under management, warned last March it intended to step up pressure on five companies to either cease relations with Sudan’s government or take steps to try to ease suffering and end killings in Darfur. It has now sold about $58 million of holdings in PetroChina, a Hong Kong-listed unit of its parent China National Petroleum Corp. (CNPC), India’s state-run Oil and Natural Gas Corp. (ONGC) and Sinopec after deciding talks held with the companies last year failed to make sufficient progress (EIF Jan.6,p6). TIAA-CREF kept its stake in Malaysia’s Petronas, which it said “has acknowledged our concerns and engaged in dialogue about how it might address them.” The fund owns shares in at least two of Petronas’ listed subsidiaries, according to a Petronas spokesman, who declined to comment on the dialogue with TIAA-CREF. The divestment decision followed three years of efforts to engage with the companies on the issues, when the fund “really struggled just to make contact,” said John Wilson, TIAACREF’s director of corporate governance, noting the difficulty of influencing companies that “respond to the priorities of states” rather than to other shareholders.
CNPC dominates Sudan’s oil sector as the largest shareholder in Greater Nile Petroleum Operating Co., which produces 180,000 barrels per day. It also co-owns the 100,000 b/d Khartoum refinery with the government. ONGC, Sinopec and Petronas also have stakes in Sudanese ventures. While PetroChina has no direct interests in Sudan, its close ties to CNPC means TIAA-CREF regards it as the same entity. Pressure group Investors Against Genocide is urging other investors to follow TIAA-CREF’s lead. Vanguard, which announced a human rights policy in March 2009, is a target since it has increased its holdings in PetroChina and CNPC. Investors Against Genocide calls Vanguard’s policy “toothless.” Adding to momentum, Barclays Global Investors, with $1.7 trillion of funds, has announced plans to develop an iShares Genocide-Free exchange-traded fund.
Some investors now bar holdings in companies active in countries known for less-severe human rights abuses. Boston Common Asset Management has a blanket ban on companies with major operations in Sudan, but it also will not invest in firms in strategic industries in Myanmar, such as France’s Total, Schlumberger and SBM Offshore, or in Royal Dutch Shell because of its record in Nigeria, says Steven Heim, director of social research. Meanwhile, the US Senate has yet to act on the Iran Sanctions Enabling Act of 2009, which makes it easier for state and local governments to divest from companies with investments of over $20 million in Iran’s energy sector. How effective TIAA-CREF’s move is may initially be judged on what action Petronas takes in Sudan. But few are holding their breath that China, which traditionally does not mix business with politics, will change course in Sudan, Iran, Myanmar or any other trouble spot. As one of the biggest investors in these countries, divestment campaigns that fail to sway Beijing can only expect limited success.
Boston Common claims some successes already, having persuaded Petrobras to confirm it will not invest in Sudan. It says shareholder pressure was behind a decision by Sweden’s ABBto pull out of a hydropower project in Sudan, too.
