SWEDEN – The SEK14.5bn (e1.57bn) national premium pension fund Sjunde AP-fonden (AP7) has blacklisted 30 companies from its equity portfolio following a scathing report on their environmental and ethical records.
The reasons for excluding the stocks range from allegations of discrimination against women in a company’s workforce to manufacturing landmines, according to Peter Norman, managing director of Stockholm based AP7.
When the AP funds were established at the end of last year the Swedish government gave them a mandate to consider environmental and ethical issues in the allocation of fund assets without jeopardising their performance.
“ What we did really was to have two cornerstones, so to speak, the first is that companies in Sweden should obey the Swedish law, and companies outside Sweden should live up to the conventions and treaties signed by the Swedish government,” Norman says.
Unlike most other ethically invested funds, AP7 has not excluded tobacco, alcohol and firearms from its portfolio, on the grounds that a lot of people drink and smoke, and also because the Swedish government is involved in arms manufacturing and trade, the fund explains.
According to the fund, its decisions are based on court judgements, official investigations or direct admission on the part of the companies’ management after investigations of their record regarding violations of human rights.
“ The underlying, the only, reason for excluding companies is the hope that they will be persuaded to change their production, employment policy or whatever it was that led to their being excluded,” Norman says.
An official report from the AP7 gives examples of some the firms excluded from its portfolio.
The only Swedish company dropped by AP7 is stationery manufacturer Esselte, whose factory in Tijuana, Mexico, AP7 claims, has imposed mandatory pregnancy tests on its female workers.
The AP7 report, alleges: “Reports show that women have been required to state whether or not they are pregnant when applying for jobs at the plant, and that female employees there have had to undergo pregnancy tests.”
Other companies on the AP7 blacklist include US based Chevron Corp, USA.
The Swedish fund claims Nigeria’s military forces have on three occasions used vehicles, including boats and helicopters, on contract from a joint venture company owned by a Chevron subsidiary, in intervention against demonstrators and local civilian populations.
Investments in Singapore based Chartered Semiconductors Manufacturing have been withdrawn because the company is a member of a group that owns companies that manufacture landmines, alleges the fund.
An international treaty, ratified by 115 countries, including Sweden, prohibits the use, production, storage and sale of land mines.
US company Sears Roebuck & Co has been excluded, with AP7 alleging: “Since the conditions at Daewoosa Samoa Ltd, a company that manufactures clothing for the American company, include, it is reported, slavery, failure to pay wages, harassment of women, starvation and inhuman living conditions.”
Stocks in Brazilian Petroleo Brasileiros have been sold after a report was published claiming that it had been the cause of major oil spills on several occasions, including an oil platform that sunk and caused several deaths, claims AP7.
The company has been fined by the Brazilian government for an oil spill at Baia de Guanabara.
“These violations are so serious and obvious that no fund manager would hesitate about excluding such companies from a portfolio,” AP7 says in its report.
According to fund policy, any company can be excluded for a maximum of five years from its investment brief.
According to Norman, the exclusion of the 30 companies on the AP7 black list, would have affected the fund’s returns by 0.1% during the last two-year period that they were included in its portfolio.
AP7’s benchmark includes nearly 2,000 components and it employs Stockholm based consultant Etikanalytikerna in its ethical research. A review of its investments is done twice a year.