CASPER
THE FRIENDLY GHOST
BOSTON – TIAA-CREF has become the first large U.S. fund complex to sell stakes in a group of Asian energy companies over human rights concerns in Sudan.
The sales of shares of China's PetroChina Co Ltd, CNPC Hong Kong and Sinopec, and Oil and Natural Gas Corp of New Delhi totaled about $60 million, TIAA-CREF said on Monday.
The stakes sold were just a small slice of New York-based TIAA-CREF's assets under management, which stood at $402 billion at the end of September, and a tiny percentage of the oil companies' market capitalization.
Still, the move could put more pressure on the companies over their business ties to Sudan's government, which is widely accused of war crimes.
The move by TIAA-CREF, which provides financial services to nonprofits like hospitals and universities, also marks a milestone for rights activists who have tried for years, mostly in vain, to line up the influential fund industry behind its social agenda.
"We hope this could send a strong message to the companies," said Hye-Won Choi, TIAA-CREF's head of corporate governance. She said her firm had sold the shares only after talks with the energy companies went nowhere.
India's ONGC said it was concerned about TIAA-CREF'S move but the firm's business in Sudan would continue.
ONGC, which leads India's hunt for foreign petroleum assets, entered Sudan about seven years ago, buying a 25 percent stake in the Greater Nile Project, from which Canada's Talisman Energy Inc exited under pressure from human rights group.
Talisman had said that political risks, which had pressured the firm's stock price, outweighed impressive financial returns, but such concerns have not deterred ONGC, which also bought stakes in Sudnese blocks from Austrian energy group OMV.
"This will not impact our investment decision in Sudan," ONGC Chairman R.S. Sharma said, reacting to TIAA-CREF's move.
"Our operations area is away from any disturbed activity area. Secondly, we are very much conscious that we do not support suppressive activities. Any investor group withdrawing support causes pain and concern," Sharma told Reuters.
ENGAGEMENT
"We always believe engagement is far more effective than divestment," Choi said, noting that TIAA-CREF did not sell shares of companies doing business in South Africa in the 1980s, the last major public effort to promote divestment.
"However, in this situation, engagement was not effective, and we believed the gravity and magnitude of the situation in the Sudan required a different response," she said.
The companies are among those whose royalty payments activists blame for propping up Sudan's government. The International Criminal Court has charged the nation's president, Omar Hassan al-Bashir, with crimes against humanity and war crimes stemming from the ongoing conflict in the country's western Darfur region.
Asked about the sales, a Sinopec spokesperson said: "Investors make rational judgments based on value. If some sell, others will buy." The other companies were not immediately available for comment on Monday.
PRESSURE TO FOLLOW SUIT?
Many U.S. universities, state pension funds and other organizations have sold shares of the companies, hoping to put pressure on the central government in Khartoum.
However, large mutual fund firms, including Fidelity Investments, Vanguard Group Inc and American Funds' parent Capital Group Cos, have resisted calls to do the same. Some said their investments could create leverage to improve conditions in troubled countries.
TIAA-CREF blazed a trail when it said in March it would seek meetings with the four companies and Petronas over their Sudan dealings. It had threatened at the time to divest shares unless the companies began a progressive dialogue.
Only Petronas has met those terms, TIAA-CREF said, adding that the Malaysian state oil company's chief executive, Hassan Marican, met in Kuala Lumpur over the summer with leaders who included the fund complex's CEO, Roger Ferguson Jr.
"They acknowledged this was an issue of concern," Choi said, adding that other executives have held discussions since then on exactly what policy changes might improve the situation in Sudan. As of last week TIAA-CREF said it held $4.7 million worth of shares in two Petronas subsidiaries, Petronas Gas and Petronas Dagangan.
Whether TIAA-CREF's actions will spark similar moves by other fund companies remains to be seen.
In Hong Kong, Nicholas Yeo, an equity executive with Aberdeen Asset Management, said he didn't expect other managers to follow unless their clients pressed for action.
Although Aberdeen holds shares of PetroChina and has heard concerns from some of its U.S. and European investors, it has not heard enough of an outcry to sell its shares.
"For us, PetroChina is a China play, and not solely a Sudanese one," he said.
Eric Reeves, a professor at Smith College in Northampton, Massachusetts, and prominent critic of the Sudan regime, said TIAA-CREF's move was "an enormously important victory" that would add to pressure on other fund companies.
The sales of shares of China's PetroChina Co Ltd, CNPC Hong Kong and Sinopec, and Oil and Natural Gas Corp of New Delhi totaled about $60 million, TIAA-CREF said on Monday.
The stakes sold were just a small slice of New York-based TIAA-CREF's assets under management, which stood at $402 billion at the end of September, and a tiny percentage of the oil companies' market capitalization.
Still, the move could put more pressure on the companies over their business ties to Sudan's government, which is widely accused of war crimes.
The move by TIAA-CREF, which provides financial services to nonprofits like hospitals and universities, also marks a milestone for rights activists who have tried for years, mostly in vain, to line up the influential fund industry behind its social agenda.
"We hope this could send a strong message to the companies," said Hye-Won Choi, TIAA-CREF's head of corporate governance. She said her firm had sold the shares only after talks with the energy companies went nowhere.
India's ONGC said it was concerned about TIAA-CREF'S move but the firm's business in Sudan would continue.
ONGC, which leads India's hunt for foreign petroleum assets, entered Sudan about seven years ago, buying a 25 percent stake in the Greater Nile Project, from which Canada's Talisman Energy Inc exited under pressure from human rights group.
Talisman had said that political risks, which had pressured the firm's stock price, outweighed impressive financial returns, but such concerns have not deterred ONGC, which also bought stakes in Sudnese blocks from Austrian energy group OMV.
"This will not impact our investment decision in Sudan," ONGC Chairman R.S. Sharma said, reacting to TIAA-CREF's move.
"Our operations area is away from any disturbed activity area. Secondly, we are very much conscious that we do not support suppressive activities. Any investor group withdrawing support causes pain and concern," Sharma told Reuters.
ENGAGEMENT
"We always believe engagement is far more effective than divestment," Choi said, noting that TIAA-CREF did not sell shares of companies doing business in South Africa in the 1980s, the last major public effort to promote divestment.
"However, in this situation, engagement was not effective, and we believed the gravity and magnitude of the situation in the Sudan required a different response," she said.
The companies are among those whose royalty payments activists blame for propping up Sudan's government. The International Criminal Court has charged the nation's president, Omar Hassan al-Bashir, with crimes against humanity and war crimes stemming from the ongoing conflict in the country's western Darfur region.
Asked about the sales, a Sinopec spokesperson said: "Investors make rational judgments based on value. If some sell, others will buy." The other companies were not immediately available for comment on Monday.
PRESSURE TO FOLLOW SUIT?
Many U.S. universities, state pension funds and other organizations have sold shares of the companies, hoping to put pressure on the central government in Khartoum.
However, large mutual fund firms, including Fidelity Investments, Vanguard Group Inc and American Funds' parent Capital Group Cos, have resisted calls to do the same. Some said their investments could create leverage to improve conditions in troubled countries.
TIAA-CREF blazed a trail when it said in March it would seek meetings with the four companies and Petronas over their Sudan dealings. It had threatened at the time to divest shares unless the companies began a progressive dialogue.
Only Petronas has met those terms, TIAA-CREF said, adding that the Malaysian state oil company's chief executive, Hassan Marican, met in Kuala Lumpur over the summer with leaders who included the fund complex's CEO, Roger Ferguson Jr.
"They acknowledged this was an issue of concern," Choi said, adding that other executives have held discussions since then on exactly what policy changes might improve the situation in Sudan. As of last week TIAA-CREF said it held $4.7 million worth of shares in two Petronas subsidiaries, Petronas Gas and Petronas Dagangan.
Whether TIAA-CREF's actions will spark similar moves by other fund companies remains to be seen.
In Hong Kong, Nicholas Yeo, an equity executive with Aberdeen Asset Management, said he didn't expect other managers to follow unless their clients pressed for action.
Although Aberdeen holds shares of PetroChina and has heard concerns from some of its U.S. and European investors, it has not heard enough of an outcry to sell its shares.
"For us, PetroChina is a China play, and not solely a Sudanese one," he said.
Eric Reeves, a professor at Smith College in Northampton, Massachusetts, and prominent critic of the Sudan regime, said TIAA-CREF's move was "an enormously important victory" that would add to pressure on other fund companies.