Fighting Genocide through Funds Management

Socially Responsible Investing, Uncategorized 2 Comments

Few investors who entrust their money to fund managers of any form would want to see their funds directed toward companies which are complicit in terms of mass genocide in countries in which they operate.

In this regard, a March 26 announcement by TIAA-CREF, a large investment firm in America, that it is stepping up efforts to combat genocide in Darfur, represents a positive initiative which should be welcomed within the investment community.

 
The announcement 

Targeting five specific companies in which it holds stock, TIAA-CREF has demanded that the companies concerned:

(a) engage in constructive dialogue with the TIAA-CREF, in which the investment firm will encourage them to take proactive and meaningful steps toward the objective of eliminating genocide and suffering within the Darfur region; and

(b) demonstrate an acceptable level of achievement on an ongoing basis with respect to the above goal.

According to the announcement, the fund manager intends to divest itself of holdings in any of the target companies whose response is not satisfactory with respect to either step.

(The five firms being targeted are PetroChina, CPNC Hong Kong, Oil and Natural Gas Corporation, Sinopec and PETRONAS)

TIAA-CREF is not demanding that the firms in question necessary discontinue their operations in Sudan, although that is one option available for target firms that wish to avoid divestment.  As an alternative, target firms that wish to continue operations in the country can still avoid divestment by undertaking reasonable steps to ease the suffering of the Sudanese people.

 
Do companies take these requests seriously?
Apparently so.

Since 2006, TIAA-CREF has engaged twenty-two firms in discussions in order to encourage them to avoid any form of complicit support with respect to the genocidal Sudanese government.

These discussions have produced results – ten of the companies involved have since either ceased operations in Sudan or committed to appropriate humanitarian initiatives.

As a (nearly) $400billion financial services company, it appears that TIAA-CREF has quite an impact, and that its investee firms sit up and take notice when it makes demands about social responsibility.

 
Shouldn’t funds pressure companies to leave Sudan altogether?
I don’t think so, although there is a fair case for it.

On one hand, by continuing to operate in Sudan, and thus paying taxes (and no doubt bribes) to the Sudanese government, companies are effectively helping to fund a regime that sponsors genocide and other human rights abuses on an unbelievably massive scale.

By discontinuing operations, the companies concerned would no longer contribute funding to such an appalling regime.

On the other hand, it is difficult to see how leaving Sudan would help ease human suffering. After all, the regime is hardly likely to stop genocide just because a few companies discontinue operations, not to mention the plight of workers, who would suffer from loss of employment (admittedly a highly exploitative employment arrangement).

Rather than leaving the region, I would have thought that by undertaking humanitarian initiatives within the region, companies would have a more positive impact upon the lives of those who suffer from the appalling situation there. It is easy to see how programs to help improve education, health and water supplies have a direct positive impact upon the lives of people in Darfur.

In contrast, any benefit which the people of Darfur would derive from companies divesting in Sudan is less clear.

 
Summary
TIAA-CREF’s announcement represents a positive initiative in terms of the contribution of the global investment community toward the goal of eliminating genocide and suffering in Darfur, and should be warmly welcomed by the global investment community?

 
Over to you
Do you think fund managers should pressure companies in which they invest to cease operations in Sudan altogether? Or is requiring such firms to contribute toward humanitarian initiatives an even better idea?

 
 

2 Responses to “Fighting Genocide through Funds Management”

  1. Brad Shorr Says:
    April 3rd, 2009 at 9:55 pm

    Andrew, what difficult questions. Is it possible to make humanitarian headway in a country where there is so much corruption and hatred in the government? Seems to me that vacating the area removes all hope, whereas staying, even on far less than ideal terms, at least offers a slight chance. Would the Cuban people have been better off if the U.S. had maintained relations with Castro? Would the Chinese people be better off without Western involvement? North Korea? I really don’t know, but we sure need to discuss this topic a good deal more.

    Brad Shorrs last blog post..An Online Marketing Fairy Tale

  2. drew Says:
    April 3rd, 2009 at 10:05 pm

    Brad,

    With the possible exception of China, where economic growth seems to have lifted millions from absolute poverty, I would agree that all of these questions are very difficult to answer.

    With Cuba, I am not sufficiently familiar to make informed comment, and North Korea represents a horribly complex issue (one which I will no doubt blog more about in the near future).

    Overall, I don’t think there is one right answer, and judgment calls, which will usually involve difficult trade offs, have to be made with respect to each and every individual countries situation.

    With the Sudan situation, I think the case for companies to stay is stronger, provided they make a positive contribution toward humanitarian initiatives, than the case for lobbying them to leave.

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