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October 14, 2010
Investors Against Genocide Expands Focus Beyond Shareowner Engagement to Include Recommendations for Financial Advisors
    by Robert Kropp

A white paper published by the organization documents successful engagements with financial institutions, as well as advice for financial advisors whose clients wish to practice genocide-free investing. First of a two-part series.


Founded in 2007 in response to genocide in the Darfur region of Sudan, where hundreds of thousands of people have been killed and another three million displaced, Investors Against Genocide (IAG) seeks to bring pressure on investment firms to end their investment in companies that contribute to genocide or crimes against humanity.

According to IAG, five Asian oil companies—PetroChina, CNPC Hong Kong, Oil and Natural Gas Corporation, Sinopec, and PETRONAS—have provided revenue to the government of Sudan for arms and funding of genocide, rather than economic development for the poor people of Sudan. Large mutual funds that have not yet made a commitment to genocide-free investing include Fidelity, Franklin Templeton, and Vanguard.

In a white paper entitled
Genocide-free Investing: New Opportunities for Investors, IAG documents some of the successes it has had in its engagement with financial institutions on the issue. Unlike the three above-named companies, which continue to hold large investments in companies linked to genocide, American Funds and Teachers Insurance and Annuity Association - College Retirement Equities Fund (TIAA-CREF) have sold their holdings in companies with ties to the government of Sudan.

In January, when TIAA-CREF announced its divestment, it stated that its efforts at engagement with the companies resulted in "insufficient progress to warrant continued dialogue." John Wilson, Director of Corporate Governance at TIAA-CREF, told SocialFunds.com that working with the Sudan Engagement Group of the
Principles for Responsible Investment (PRI) helped, "Because we were able to collaborate with other investors."

At the time of TIAA-CREF's announcement, Eric Cohen, the Chairperson of IAG, stated, "TIAA-CREF's commitment to act sets a higher standard for the entire financial services industry."

Citing a 2010 study by KRC Research, IAG's white paper reports, "Americans are overwhelmingly opposed to being financially connected to genocide." According to KRC, 88% of respondents want their mutual funds to be genocide-free, and 84% said they would "withdraw their investments from American companies that do business with companies that directly or indirectly support genocide."

According to the white paper, pension funds and other organizations have begun to respond to genocide-free investment options. In May, for instance, the
Unitarian Universalist Association (UUA) announced that it would move its $178 million pension account from Fidelity to TIAA-CREF. Following the unanimous vote of UUA's Compensation, Benefits, and Pension Committee to switch to TIAA-CREF, UUA President Peter Morales stated, "We couldn't continue to watch passively as money we earned through religious service was directed to companies profiting from a genocidal regime. As clients of Fidelity, we tried to create change from within, but after four years, it became clear that Fidelity's position on investing in the Sudan hadn't changed one iota."

In its white paper, IAG reports that it has coordinated the submission of shareowner proposals to mutual fund companies, requesting that they take action to prevent the holding of investments in companies that contribute to genocide. According to IAG, "Supporting votes have been as high as 31% at Fidelity, 24% at Putnam, and 17% at Vanguard." Shareowner proposals were withdrawn at TIAA-CREF, and at BlackRock's iShares as well, after engagement produced positive outcomes.

"Divestment and threat of divestment can have real impact on governments and make a difference for people in affected countries," the white paper states. For example, the divestiture in PetroChina by 60 colleges and 28 states helped inspire the unanimous passage by the US Congress in 2007 of the Sudan Accountability and Divestment Act (SADA), which, according to IAG, "Provides explicit support for fiduciaries to divest from Sudan."

"Although there may be few actions that individuals can take," the white paper continues, "One area which each person can control is how their money is invested, and how the organizations with which they affiliate invest their money." However, while most Americans do not want their investments to support genocide, many are unaware of how their savings are being invested. Therefore, according to IAG, "Financial advisors are in a key position to assist their clients and to encourage mutual funds to demonstrate a commitment to genocide-free investing."

As Susan Morgan, a co-founder and Director of Communications of IAG, told SocialFunds.com, "Our work has moved from a first phase of engagement with companies, now that there are alternatives to investing in funds that support genocide. Now it's important for us to get the word out on companies that have taken the right steps, and inform consumers as to how to invest with them. The paper focuses on financial advisors because they're in the position to help inform their customers."

The white paper provides a number of recommendations for financial advisors to ensure that their investment decisions reflect the preference of their clients to avoid investments that support genocide. In addition to providing their clients with specific information on their investments, advisors can also evaluate the genocide-free and sustainable investment alternatives that are available, and facilitate the transfer of investments out of funds that support genocide. If an advisor can arrange the transfer of the assets of many clients at one time, and provide investment companies with the reason for doing so, "The larger balances involved will gain a higher degree of attention within the financial institutions and better leverage each client's action."

If clients choose not to move their funds, they can still have an impact by submitting shareowner proposals requesting genocide-free investment. "Investors Against Genocide makes the process simple," the white paper states, "But advisors can facilitate it by further working with us to prepare the necessary paperwork and explain the process."

Next: a conversation with Eric Cohen, co-founder and Chairperson of Investors Against Genocide.

 

 
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