European pension schemes join Burma action group
EUROPE - A group of European financial institutions including the £21bn (e33.5bn) UK Universities Superannuation Scheme (USS) and e48bn Dutch superfund PGGM have formed an action group to raise concerns about investment in Myanmar – formerly known as Burma.
Collectively, the Group, which represents almost £400 billion in funds under management and includes the Co-operative Insurance Society, Switzerland’s Ethos Investment Foundation, Friends Ivory & Sime, Henderson Global Investors, Jupiter Asset Management, and Morley Fund Management, have issued a statement entitled 'Business Involvement in Myanmar (Burma) - A statement from institutional investors.'
The statement outlines the concerns raised by the presence of a military dictatorship in Burma and highlights the risks to shareholders in investing in companies that have interests in the country. The Group suggests that companies operating in unstable political climates can be exposed to loss of shareholder confidence, negative press and publicity campaigns, safety risks and corruption. In the case of Burma, there is also the possibility of a democratically elected government returning to power and penalising companies that supported the military regime.
While the statement does not call for divestment, it urges companies to be aware of the risks and to establish effective policies and procedures for managing them.
It is consistent with the Socially Responsible Investment Guidelines recently issued by the Association of British Insurers calling upon companies to adopt responsible business practices so as not to contribute to, or perpetuate, human rights abuses committed in the country.
The statement reads as follows:
Business involvement in Myanmar (Burma) – a statement from institutional investors
As institutional investors, we are mindful of the risks and responsibilities our investee companies face when they operate or have business relationships in countries governed by repressive regimes. Experience shows that companies operating in such environments are exposed to extraordinary business risks including:
* widespread public condemnation and attendant reputational damage, resulting from sanctions, boycotts or public campaigns by customers, governments, international bodies and non-governmental organisations;
* poor staff safety, threat of asset expropriation, pervasive corruption and other political risks inherent in operating in a highly volatile environment;
* the possibility of being penalised in a democratic environment by the new government(s);
* loss of confidence and subsequent action by shareholders.
Given the above, we wish to inform the companies in which we invest, and those in which we may wish to invest in the future, that we have grave concerns about companies with operations or business relationships in Myanmar (Burma).
Our concerns have been raised by the continuing presence of a military dictatorship, which came to power as a result of a military takeover, and the continuing scale of flagrant human rights and other abuses. We are mindful of the influence of foreign direct and indirect investment provided by companies, whose shares we own, and are concerned that this may play a role in sustaining the current military regime. While we acknowledge the efforts made by several foreign companies to have a positive impact through constructive engagement, we are concerned that many of the risks identified above still remain.
Where companies do choose to invest or have business relationships in Burma, we call on them to justify their involvement in the light of the risks that such activity imposes on shareholders. In particular, we want to be confident that directors have fully considered the risks and, at very least, have established effective policies and procedures systems for managing them. Specifically, we think it is incumbent on such companies to:
* carry out and publish independently verified social impact assessments to ensure accurate understanding of the risks they face including those relating to human rights abuses and corruption;
* establish effective policies and procedures for managing these risks including commitments to promote international human rights and combat corruption within company operations and the wider local and national community;
* seek to maximise the positive impact of their actions through collaboration with other companies and respected organisations;
* provide detailed and independently verified reports on their performance against these policies;
* ensure that these matters are regularly reviewed by the Board and disclosed in the Annual Report.
Companies should also satisfy themselves that joint venture and other business partners are taking the above steps to avoid risk.
We recognise and are re-assured by the fact that some companies are already undertaking some of these activities. Equally, where companies are not meeting these standards, they expose themselves to risks of critical shareholder and stakeholder action and resolutions. As investors, we would like to support management in achieving best practice on these issues and so urge companies ensure that they follow the approach outlined above.
Good practice policies and approaches for operations in Burma include:
* Ensuring that state agencies known or alleged to have committed human rights abuses are not contracted to work in the company’s operational area.
* Ensuring that contracts with state agencies providing security make explicit the human rights obligations the host government has assumed under the International Covenant on Civil and Political Rights and other humanitarian norms. Where possible, it would also be good practice to make public such contracts, with the exception of operative details that could jeopardise individuals’ safety.
* Urging investigation and prosecution when security personnel protecting a company’s operation are alleged to have committed human rights abuses, and expressing public disapproval of investigating authorities where investigations are not pursued and cases are left unresolved where the evidence supports appropriate legal action.
* Investigating supply chains, including sub-contracting structures, to determine whether the ultimate source of products is Burma. Where products are sourced from Burma, supply chains should be independently verified as complying with internationally accepted labour standards.
* Ensuring that manufacturing operations inside Burma are not joint ventures with the military or its associates by establishing procedures to assess the probity of contracting organisations, including procedures for both excluding them from potential contracts and reinstating them if their behaviour warrants it.
* Ensuring that capital is disbursed in a transparent and accountable way, into accounts that operate within international accounting standards.