Public Pensions Review Investments in Sudan

"How could it be possible for them to burn people, children, and for the world to keep silent? No, none of this could be true. It was a nightmare."
Elie Wiesel, Night

While American corporations are forbidden to conduct business with Sudan (except for humanitarian missions) through Bill Clinton's executive order in 1997. Many Americans are tied to Sudan through investments in international stocks. States and Public Pension funds have begun to reconsider their links to Sudan through their portfolios.

Third-party research firms, Institutional Shareholder Services, Conflict Securities Advisory Group, and KLD Research among others compile lists of companies involved in Sudan. KLD's Sudan Compliance Service has isolated 124 companies including eight U.S. businesses linked to Sudan. Inclusion on these lists can be ambiguous at best. 3M was included and claim their association to Sudan is limited to selling Scotchshield Ultra Safety adn Security Film to the UN.

New Jersey, Illinois, and Oregon have passed laws that obligate public pensions to divest from their portfolios any holding of a company with investments, facilities or employees in Sudan. Money managers have responded. Northern Trust has created six index funds that ostracize Sudan-linked stocks for its institutional clients. Illinois has already invested $8 billion across the six funds.

Funds meant to mimic the performance of American indices such as the S&P 500 or the Russell 2000 aren't as likely to be impacted since American business are prohibited from involvement with Sudan. The most vulnerable funds are those meant to parallel foreign indices such as the MSCI EAFE (Morgan Stanley Capital Int'l Europe Australasia Far East). Over 25 companies (+9% of the index's market cap), including Royal Dutch Shell, Toyota, Siemens and Ericsson may be excluded from the fund. Vanguard is still considering if it will create Sudan-Free funds while Fidelity has yet to take the contention under advisory.

Will divesture lead to change? American divesture of Talisman Energy, led the Canadian company to abandon interests in Sudan. PetroChina's IPO in 2000 was largely ignored by college endowments and public pension funds due to oil extraction in Sudan. The larger pension funds, Calpers and the New York City Comptroller view divesture as a last resort and are talking to the Sudan-linked companies directly about their involvement in Sudan.