KLD Marks One-Year Anniversary of its Sudan Compliance Service

Despite the U.S. government’s official proclamation of genocide in the Sudan, civil fighting and famine have killed more than 200,000 and displaced 2.5 million.¹ The genocide in Darfur has drawn the attention of public and private sector activists who advocate financial leverage as one means to send the message that the killing in Sudan must stop.

Over the past 18 months, the movement to divest from Sudan has been growing in the United States, in state government, and on university campuses. More than 30 universities and colleges have agreed to divest their endowment holdings from companies doing business in the Sudan, while student activist groups in over two-dozen other schools are urging their administrations to divest. In March 2006, Harvard University sold its estimated $8.3 million holdings in Sinopec Corporation. Individual cities across the country have also divested or initiated divestment campaigns, including Newton and Cambridge, MA and San Francisco, CA.

Several states have passed Sudan divestment legislation, which bars state pension funds from investing in companies doing business in the Sudan. Illinois was the first state to pass divestment legislation (Illinois Public Act 0043-0097) mandating that its public pension funds, whether invested internally or through outside money managers, divest companies operating in Sudan (effective January 2006). Since then, the state legislatures of New Jersey, Oregon, California, Maine, and Connecticut have followed Illinois’ example and successfully passed divestment legislation.

Other states have engaged in various levels of divestment compared to Illinois’ comprehensive divestment policy. Ohio and Vermont passed divestment resolutions urging state pensions to consider adopting a divestment plan. Louisiana, Arizona, Missouri, Tennessee and Pennsylvania have passed or are considering legislation that does not directly address the genocide, but screens its pension funds for investments linked to countries that support terrorist activity, like the Sudan.

In a number of states, divestment legislation was introduced but failed to pass; however in fourteen states, state officials expect to present new resolutions in the 2007 legislative session. Several other states have taken first steps to organize a Sudan divestment campaign in their state.

In response to the growing Sudan divestment movement, KLD created the Sudan Compliance Service in November 2005 to help the managers of state pensions funds comply with the new regulations. KLD’s Sudan Service identifies publicly traded companies worldwide — encompassing more than 130 companies — that do business in the Sudan and explains their inclusion on the list. At present, mainly non-U.S. companies are invested in the Sudan.

Among some of the largest companies on KLD’s Sudan Compliance Service include:

- Alcatel, the French telecommunications firm that won a contract to lay the undersea cable linking the Sudan with Saudi Arabia through the Red Sea;

- Total SA, the Franco-Belgian oil company which regularly renews its rights to the Block B oilfield located in southeastern Sudan;

In recent months, key developments point to the Sudan divestment movement’s momentum. In a high-profile event in September 2006, Governor Arnold Schwarzenegger signed and adopted a divestment policy for the California Public Employees Retirement System (CalPERS) and the California State Teachers Retirement System (CalSTRS). Actors Don Cheadle and George Clooney and former Secretary of State George Shultz participated to show their support for the policy.

In November 2006, a bi-partisan coalition of two US Senators and six US Representatives led by Sen. Sam Brownback (R-KS) joined with the Sudan Divestment Task Force, a project of the Genocide Intervention Network, to appeal to the 44 remaining states that have not passed divestment legislation to do so.² The Congressional letter states: “We encourage you to review your state's pension funds and identify companies which are doing the type of business in Sudan that is aiding the government and fulfilling this genocide, not helping the people.”³

While public sector actions have increased regarding Sudan Divestment, some detractors have recently emerged. The National Foreign Trade Council (NFTC), made up of 300 companies involved in international trade, filed a lawsuit on August 7, 2006 against Illinois over the state’s divestment plan. Some of the companies on the divestment list that the Illinois State Board of Investment provided to money managers are members of the NFTC. Central to the lawsuit is the debate on whether state pension funds should dictate foreign trade laws.

KLD’s Research and Compliance Group actively monitors the news headlines and actions in state houses regarding Sudan Divestment, in addition to managing the KLD Sudan Compliance Service.  For more information, please contact Randy O’Neil at (617) 426-5270 ext. 292.