Bennett Freeman

The Sudan divestment campaign has emerged as the most significant divestment movement since that directed at South Africa from the late 1970s until apartheid’s demise in the early 1990s. While the current campaign focuses on the genocide and continuing humanitarian crisis in Darfur, it has also renewed the debate over divestment response to such unacceptable situations.

There is no question that the humanitarian crisis in Darfur remains grave and demands urgent action on the part of the international community. The challenge now is how best to bring pressure to bear on the government of Sudan in order to prevent further killings and abuses and to undermine its capacity to wage war against its own people.

Calvert focused on this issue last year as the crisis in Darfur continued and the Sudanese government resisted deployment of a UN peacekeeping force. Application of Calvert’s human rights and Indigenous Peoples’ Rights criteria ensure that our social funds have no investments in companies that contribute materially to maintaining the Sudanese government in power. But as a leading socially responsible investment (SRI) firm with a strong history of shareholder advocacy, we wanted to make an even more tangible contribution. Moreover, because the Calvert Social Investment Fund was the first U.S. mutual fund to decide not to invest in companies doing business in apartheid South Africa, we were familiar with the positive impact that divestment can make.

For these reasons, Calvert has formed a partnership with the Sudan Divestment Task Force (SDTF) and the Save Darfur Coalition (SDC), which are at the forefront of the Sudan targeted divestment movement. We are now supporting these two groups with our analytical expertise and advocacy capabilities as their work has gained greater momentum and urgency.

The Sudan divestment movement is more complicated in some respects than its South Africa predecessor. When we compared the South Africa divestment campaign with the Sudan divestment movement, we identified similar objectives that allow us to apply two key lessons learned from that experience. Both movements have offered an opportunity to respond to repression by exerting pressure, and in both cases the emphasis has been on major companies that legitimize a repressive regime and facilitate repression. Yet targeted divestment in Sudan focuses sharply on companies that directly empower the regime; it is not as broad-based as the South Africa divestment campaign became. Particular care must be taken to determine which companies to engage and whether divestment is an appropriate course of action.

Calvert has always operated on the principle that investment can change the world as a positive force. But when confronted with companies that do not meet our rigorous social criteria, we prefer to engage when possible and divest only when necessary. The targeted divestment approach allows us to do just that by focusing on a relatively narrow group of companies with direct ties to the government and which are operating in Sudan in ways that at least indirectly legitimate and facilitate the regime’s actions in Darfur.

The SDTF’s targeted divestment list therefore focuses on large-infrastructure companies, especially those that are essential to the fundamental workings of the Sudanese economy and contribute most to its revenue base. This approach emphasizes companies operating in the oil sector, the major source of revenue for the government. And because it focuses on the industry sectors with the most impact, targeted divestment does not harm those in need. The goods and services they rely on will continue flowing through the traditional sources that provide aid in Sudan. An example of a company that continues to conduct limited operations in Sudan but is not subject to targeted divestment is 3M (MMM), which sells its Scotchshield Safety and Security Window Film to help protect the vehicles of UN aid workers in Sudan. Likewise, food and beverage as well as pharmaceutical companies are not targeted since their goods and services are critical to the people of Sudan, whether in Darfur or elsewhere.

In January 2007, two of the world’s largest multinationals—ABB and Siemens—announced their intentions to suspend operations in Sudan, apart from those operations consistent with the UN Global Compact. ABB’s decision in particular was the outcome of intensive engagement on the part of SDTF and others. ABB had been involved in building Sudan's Merowe Dam and provided support to oil consortiums operating in the country. ABB’s suspension of such operations shows that the multi-faceted targeted divestment approach can influence companies to halt activities that support the Khartoum regime. ⁽¹⁾

We believe that major institutional investors and asset managers should review their portfolios to determine whether they include holdings in any companies which are on SDTF’s targeted divestment list. If they find that they do hold such companies, they should probe the specific nature of their operations and links to the government in Sudan. They should then make a judgment as to whether such a company’s continued presence exacerbates the situation in Darfur, or instead can be focused in certain ways so that it can help mitigate the humanitarian crisis. If the company’s impact cannot be mitigated, divestment may then be appropriate.

The dynamic interplay of divestment and engagement can achieve results and must continue to bring pressure to bear on the government of Sudan until the conflict can be resolved through diplomatic and other political means. In addition, the targeted divestment movement makes a critical political and moral statement that certainly merits emphasis alongside the overall economic impact that we are trying to achieve. While divestment and engagement can work, and investment decisions matter, what matters most is bringing the conflict and abuses to an end by using all the tools at our disposal.

Bennett Freeman is Senior Vice President for Social Research and Policy at Calvert Group. Mr. Freeman directs the social, environmental and governance analysis and advocacy work of the largest family of socially-responsible mutual funds in the U.S. From 2003 until early 2006, he led Burson-Marsteller's Global Corporate Responsibility practice. As an independent consultant in 2002, he co-authored an independent human rights impact assessment of BP’s Tangguh LNG project in West Papua, Indonesia, the first HRIA undertaken in advance of a major energy project in the world. Mr. Freeman served in three positions as a Clinton presidential appointee in the State Department, most recently as Deputy Assistant Secretary for Democracy, Human Rights and Labor from 1999 to early 2001. In that capacity, he led the development of the Voluntary Principles on Security and Human Rights, the first human rights standard forged by governments, companies and NGOs for the extractive sectors and the first operational standard for any sector addressing corporate responsibility in zones of conflict. Mr. Freeman currently serves on the Board of Directors of Oxfam America and the Steering Committee of Amnesty International USA's Business and Human Rights program. He is also an Alternate Civil Society member of the Board of the Extractive Industries Transparency Initiative (EITI).

Endnote:

⁽¹⁾ As of February 28, 2007, 3M (MMM) represented 1.03% of Calvert Social Investment Fund (CSIF) Balanced Portfolio; 1.10% of CVS Calvert Social Balanced Portfolio; 1.65% of CSIF Enhanced Equity Portfolio; 0.43% of CSIF Equity Portfolio; 0.45% of CVS Calvert Social Equity Portfolio; and 0.67% of Calvert Social Index Fund. As of February 28, 2007, Calvert Socially Responsible Funds do not invest in ABB or Siemens. All holdings are subject to change.