Key Divestment Information

Since 2003, the government of Sudan has pursued a genocidal campaign against the civilian population of Darfur. Although obstruction by the government of Sudan has prevented the international community from determining concrete mortality statistics, at least 200,000 have died and over 2.5 million have been displaced as a result of the conflict. The U.S. government first labeled the Darfur conflict as genocide in July 2004, marking the first time the U.S. has declared a situation to be genocide while atrocities are ongoing.

Sudan has a well-documented history of responsiveness to economic pressure. Possessing neither the capital nor the expertise to fully exploit its own oil resources, the government of Sudan is highly reliant on foreign direct investment to fund its military and facilitate conflict in Darfur; up to 70% of Sudan’s oil revenues go towards its military expenditures. Furthermore, events in Sudan and the prospect of continued international sanctions have led investors to question not only the social ramifications, but also the financial prudence of investing in problematic companies operating in the country.

Download the Sudan Divestment Task Force’s Sudan Divestment Resource Guide

For a list of companies that warrantscrutiny, click here. Analytical criteria reviewed by Calvert.

 Frequently Asked Questions (Click here to download the Frequently Asked Questions)

• Why divestment?
• What is the Sudan Divestment Task Force?
• What is the targeted Sudan divestment model?
• What are the problematic companies in Sudan?
• Is targeted Sudan divestment effective?
• How will targeted Sudan divestment impact innocent Sudanese citizens?
• Is shareholder engagement a more effective way of changing company behavior?
• What can problematic companies in Sudan do to aid the country’s marginalized populations?
• How will targeted divestment impact the divesting institution’s finances?
• Is targeted Sudan divestment constitutional?
• Will targeted Sudan divestment trigger an onslaught of divestment requests concerning a whole range of social concerns?
• Who has divested from Sudan?
• How do I know if I am personally invested in offending companies operating in Sudan?
• What options and resources are available for investors?
• What are the experts saying about divestment?

Why divestment?

Since 2003, the government of Sudan has pursued a genocidal campaign against the civilian population of Darfur. Although governmental obstruction has prevented the international community from obtaining concrete statistics on mortality, hundreds of thousands have died and over 2.5 million have been displaced as a result of the conflict. The United States government first labeled the Darfur conflict as genocide in July 2004. This is the first time the U.S. has declared a situation to be genocide while atrocities are ongoing.

The U.S. has maintained sanctions on Sudan since 1997, in part due to the government of Sudan’s sponsorship of terrorist organizations. While these sanctions prevent the vast majority of U.S. companies from operating in Sudan, they generally do not prevent investors from investing in non-U.S. companies doing business there. Now, numerous individual and institutional investors from around the world are exerting shareholder pressure on problematic non-U.S. companies supporting the Sudanese regime. These efforts, which range from shareholder engagement to divestment of shares, aim to force problematic companies to address the financial and social implications of their operations in Sudan.

Furthermore, recent events in Sudan have prompted investors to also question the financial prudence of investing in problematic companies in Sudan. These firms, which support the government of Sudan at the expense of the country’s marginalized populations, carry significant financial, operational, and reputational risk.

For more information, download SDTF’s Efficacy of Targeted Divestment.

What is the Sudan Divestment Task Force?

As the coordinating entity for the targeted Sudan divestment movement, the Sudan Divestment Task Force (SDTF), a project of the Genocide Intervention Network, provides support for individuals, public fiduciaries, asset managers and government officials who are participating in targeted Sudan divestment campaigns around the world. With pro bono legal support from Cooley Godward Kronish LLP and analytical support from the Calvert Group, SDTF has developed a unique and financially sound approach to shareholder engagement and divestment, focusing efforts on the most problematic and risk prone companies in Sudan. This approach, termed targeted Sudan divestment, recently was authorized by the United States government. It helps to maximize impact on the Sudanese government while minimizing potential harm to both innocent Sudanese civilians and investment returns. SDTF also provides company research and corporate engagement assistance to thousands of fiduciaries worldwide, representing more than US $3 trillion in total assets.

For more information, download SDTF’s information sheet.

What is the targeted Sudan divestment model?

The targeted Sudan divestment model is SDTF’s recommended procedure/model for shareholder engagement and targeted divestment of problematic companies in Sudan. In contrast to other models of Sudan divestment that advocate targeting all non-humanitarian business connections to Sudan, the targeted Sudan divestment model focuses shareholder pressure on problematic companies that fit all of the following general criteria:

• The company has a business relationship with the government of Sudan is contracted on a government-created project, or is affiliated with a government-created project; AND
• The company provides little benefit to the disadvantaged populations of Sudan; AND
• The company has not developed a substantial business-practice policy addressing the fact that the company may be (sometimes inadvertently) contributing to the government of Sudan’s genocidal capacity.

SDTF developed the targeted Sudan divestment model to provide investors with an effective means to exert shareholder pressure on problematic companies operating in Sudan. The model seeks to create a positive change that helps bring about comprehensive peace in Sudan, minimize negative impacts on innocent civilians, protect long term investment returns, and conform to relevant constitutional limitations and federal law (such as the Sudan Accountability and Divestment Act). The SDTF model was developed with input from Sudan experts, institutional fiduciaries, and constitutional law experts.

The SDTF model is available in two formats: a legislative model and a sample investment policy statement.

For more information, download SDTF’s Sudan Divestment Resource Guide.

What are the problematic companies in Sudan?

SDTF publishes the quarterly Sudan Company Report, a comprehensive listing of companies with problematic business operations linked to Sudan that includes a detailed description of each company’s history and current involvement in the country.

Over the past two years, SDTF’s research team has examined more than 800 companies with Sudan-linked operations to determine whether these operations negatively impact the situation in Darfur while offering minimal benefit to Sudan’s disadvantaged populations. Only a small fraction of the examined companies make it onto the Sudan Company Report, because the vast majority of companies operating in Sudan are not problematic according to the targeted Sudan divestment model. The report is compiled with input from a variety of sources, including direct communications with problematic companies.

For more information, download SDTF’s Sudan Divestment Resource Guide.

Is targeted Sudan divestment effective?

The government of Sudan is susceptible to economic pressure. Possessing neither the capital nor the expertise to fully exploit its own natural resources, the government of Sudan is highly reliant on foreign direct investment (FDI) not only to pay its debts and subsidize government expenditures, but also to fund its military and finance the war in Darfur. In fact, a former Sudanese finance minister estimated that 70% of the government’s share of oil profits is spent on the military.

Since SDTF was established in 2005, over two dozen U.S. states, fifty-nine universities, and sixteen cities have placed restrictions on their Sudan-linked investments. Active campaigns are underway in over a dozen countries. In response to these efforts, at least ten major corporations have either ceased operations in Sudan or significantly changed their behavior in the country.

Perceiving the divestment movement as a clear threat, the government of Sudan has taken significant steps to publicly oppose divestment, placing a $1 million advertisement in the New York Times extolling the virtues of investing in Sudan, and issuing both a press release and an op-ed condemning the divestment movement. Sudanese government officials also have condemned divestment on several occasions. As Sudan researcher Eric Reeves notes, “The fact that the regime is responding so distinctly to the movement means they certainly understand the implications.”

For more information, download SDTF’s Efficacy of Targeted Divestment.

How will targeted Sudan divestment impact innocent Sudanese citizens?

SDTF strongly believes that economic investment in a developing country is an important tool for democratization and improved living standards. In order to encourage positive economic investment in Sudan, the targeted Sudan divestment is carefully tailored to target only the most problematic companies in Sudan. It therefore excludes from scrutiny any company that substantially benefits those outside of government circles. Companies involved in business related to general downstream consumer goods and services in Sudan, infrastructure development, or whose primary purpose in Sudan is humanitarian, medical, journalistic, educational, or otherwise associated with “social goods” generally are from divestment. Additionally, SDTF excludes from scrutiny the agriculture sector, which remains the country’s most important economic sector for most Sudanese citizens and employs over 80% of Sudan’ workforce. This is especially critical to minimizing harm to innocent citizens.

It is important to note that critiques about the negative impact of divestment on innocent Sudanese citizens are based on, and leveled against, broad divestment models. These criticisms do not address the particular circumstances of Sudan’s government or economy, nor do they account for the nuances of SDTF’s targeted Sudan divestment model.

For more information, download SDTF’s Efficacy of Targeted Divestment.

Is shareholder engagement a more effective way of changing company behavior?

SDTF recognizes that shareholder engagement is almost always a more effective means of reforming problematic company behavior than shareholder divestment. However, Sudan represents a unique situation where it is necessary to utilize the “stick” of divestment as a tool of last resort. Extended shareholder engagement through traditional mechanisms such as proxy voting and coalition building often takes years. This timeframe is wholly unsuited to the urgency of ongoing genocide. Not only does the threat of shareholder divestment provide a clear endpoint to the engagement process, but the threat of divestment itself has increased the willingness of many problematic companies in Sudan to engage with shareholders.

For more information, download SDTF’s Sudan Divestment Resource Guide.

What can problematic companies in Sudan do to aid the country’s marginalized populations?

SDTF, through the targeted Sudan divestment model, does not seek to force all companies to leave Sudan. When possible, SDTF encourages companies that operate in Sudan to use their leverage to push for peace and sustainable development in the country. The government of Sudan’s dependence on foreign investment gives companies operating in Sudan considerable leverage and a unique ability to influence the government’s harmful policies. It therefore is necessary to first encourage problematic companies willing to negotiate, engage, and change their behavior to stay, in order to avoid their replacement by firms that are less responsible, less responsive to human rights concerns, and unwilling to improve their behavior.

Problematic companies that choose to remain in Sudan and wish to avoid divestment are expected to implement robust corporate policies in the country that address all relevant issues. SDTF has defined these expectations for problematic companies as “substantial action” in the targeted Sudan divestment model and through its general engagement principles for problematic companies in Sudan.

One example of this is La Mancha Resources, a mining company previously targeted for divestment because of its gold mining operations in Sudan. In response, La Mancha Resources has taken extraordinary steps to ensure that it is a responsible corporate actor in Sudan, specifically addressing its provision of revenue to the government of Sudan. To learn more about La Mancha Resources and its positive changes, request a free copy of SDTF’s Sudan Company Report.

For more information, download SDTF’s Sudan Divestment Resource Guide.

How will targeted divestment impact the divesting institution’s finances?

The targeted Sudan divestment model was designed in consultation with fiduciaries, asset managers, and legal counsel to be financially prudent. To this end, the model limits the scope of companies targeted for divestment, excludes asset classes from which investors cannot easily divest, keeps implementation costs to a minimum, and includes built-in safeguards to protect against unforeseen circumstances. Additionally, by providing for a period of shareholder engagement, the model allows companies to avoid divestment by changing their behavior.

A quantitative analysis from SDTF, the Sudan Peer Performance Analysis, found that, on average, “Highest Offenders” in Sudan underperformed their peer group by 45.97% over one year, 22.23% over three years and 7.22% over five years. The one year forecasted return on equity for “Highest Offenders” in Sudan (based on analyst consensus) was, on average, 6.06% less than the peer group mean.

In light of the model’s prudence, several public pension plans independently have supported or adopted targeted Sudan divestment without a legislative mandate. In doing so, many of these funds explicitly expressed their judgment that targeted Sudan divestment is consistent with fiduciary duty.

For more information, download SDTF’s Sudan Peer Performance Analysis and Sudan Divestment Resource Guide.

Is targeted Sudan divestment constitutional?

Targeted Sudan divestment is constitutional. In December 2007, U.S. President George W. Bush signed into law the Sudan Accountability and Divestment Act (SADA). The act represents the U.S. federal government’s explicit authorization of state and municipal targeted Sudan divestment. It therefore effectively addresses concerns relating to the constitutionality of these policies by states and municipalities.

SADA also prohibits companies prohibits companies operating in industries targeted by the targeted Sudan divestment model from receiving U.S. federal government contracts, and authorizes state and local government to prohibit these contracts as well. Finally, the law provides legal protection to asset managers seeking to make the investment vehicles they offer free from certain problematic companies in Sudan.

For more information, download SDTF’s Sudan Divestment Resource Guide.

Will targeted Sudan divestment trigger an onslaught of divestment requests concerning a whole range of social concerns?

SDTF stresses that divestment is an option that should be considered only in the most extreme of circumstances. It is impractical and imprudent to heed every call for divestment. However, the overwhelmingly heinous and urgent nature of the Darfur genocide sets Sudan apart in the need for immediate international attention. Furthermore, in the particular case of Sudan, the government’s perpetration of genocide, the government’s susceptibility to economic pressure, the establishment of nuanced criteria that allow investors to distinguish between beneficial companies and problematic companies in Sudan, explicit authorization for a financially sound targeted Sudan divestment model by the U.S. federal government, and the fact that diplomatic and political efforts to solve the crisis have thus far failed combine to make targeted Sudan divestment truly singular among calls for divestment.

At present time, other divestment campaigns lack detailed engagement phases, comprehensive benchmarks for corporate behavior, proof of efficacy, or safeguards to protect fiduciary responsibility. In contrast, the targeted Sudan divestment model was explicitly developed with these concerns in mind, and thoroughly addresses each one.

For more information, download SDTF’s Sudan Divestment Resource Guide.

Who has divested from Sudan?

As of March 2008, at least twenty-four states have adopted divestment policies related to Sudan. Sixteen of these states have passed or adopted the SDTF model of targeted Sudan divestment. Additionally, at least fifty-nine universities, sixteen municipalities, and two international pension funds have adopted Sudan divestment policies. Divestment campaigns continue to gain momentum in the U.S., Canada and, increasingly, Europe.

For more information, visit SDTF’s statistics page.

For more information, visit SDTF’s interactive divestment map.

For more information, download SDTF’s State of Sudan Divestment.

How do I know if I am personally invested in offending companies operating in Sudan?

For direct investments in specific companies, investors can consult SDTF’s Sudan Company Report. For mutual funds, SDTF offers a Screening Tool to check if any of the mutual funds in which you currently invest contain holdings in problematic companies in Sudan. SDTF offers template letters to write to both companies and mutual fund managers.

For more information, visit SDTF’s get involved page.

What options and resources are available for investors?

With staff in Washington, Boston, and London, SDTF provides free research, policy, and advocacy support to individuals and institutions dealing with Sudan divestment. Along with full-time staff support, SDTF offers resources to identify problematic companies in Sudan, tools for shareholder engagement, and options for Sudan-free investing.

For more information, download SDTF’s Sudan Divestment Resource Guide.

What are the experts saying about divestment?

Economist and Nobel Prize winner Joseph Stiglitz

Nobel winner Joseph Stiglitz, who voted for divestment as a member of Amherst’s board of trustees, says the move won’t hurt civilians in Sudan. Most divestment efforts have targeted the oil industry, which, he says, does not create jobs and largely finances military operations. “The government does not have a heavy development agenda–it’s not as though the government is busy building schools in Darfur,” Stiglitz says. “It’s a pretty clear case of this money being used against the government’s own people.”

New York State Comptroller Thomas DiNapoli, sole fiduciary for the $144 billion New York State Common Retirement Fund

“The pension fund must be managed for the benefit of the members, beneficiaries and retirees, but I’m confident the members of the Retirement System do not want the pension fund to support governments that engage in genocide. And investing in companies that lend aid to these regimes is not conducive to long-term investment strategies.”

Roberta Cohen, Senior Advisor, the Brookings Institution

“In the view of some analysts, divestment campaigns may prove more effective than sanctions. Rolls Royce’s withdrawal from Sudan this past year reportedly surprised the government and affected the import of needed machine parts. The Sudanese government has publicly urged an end to divestment actions, underscoring the potential sting of their impact.”

Pennsylvania Treasurer Robin L. Wiessmann

“There is no good reason that taxpayer dollars should support companies that subsidize a genocidal regime when acceptable investment alternatives exist.”

Massachusetts Treasurer and chair of the Pension Reserves Investment Management Board, Timothy Cahill

“Given the pretty broad-based support of the Sudan divestment bill, we’ve worked with [the advocates] so that if a bill did pass it would pass so that we could still do our jobs as fiduciaries. It would have impact on the grand scale, meaning it would have some teeth, but it wouldn’t force us to go out and sell hundreds of millions of dollars or billions of dollars in stock because it was overly broad.”

Vermont Treasurer Jeb Spaulding

“The [State Investment] Committee believed it would be prudent, from a fiduciary position, to refrain from owning securities in companies listed on the Sudan Divestment Task Force Highest Offenders list, because the value of our portfolio could suffer if we continue holding those securities while other investors take affirmative action to sell securities on the list.”

Minnesota Secretary of State and Board Member of the Minnesota State Investment Board, Mark Ritchie

“I strongly support targeted divestment legislation-it is crucial for careful management of our state’s financial resources.”

Chairman of the Investment Committee of the Wyoming Retirement System, Matthew Potter

“One would have to question the business acumen of a company that makes the decision to do business with such a regime in light of all the opposition to that regime…It seems to me that continuing to hold these shares, with the knowledge that that pressure is forthcoming, truly is a violation of one’s fiduciary duty.”