GLOBAL - BASF and Nomura Holdings have been placed on an investment blacklist by Nordic SRI consulting firm GES Investment Services, for violating international ethical business guidelines.
The two international groups appear on a list of 25 companies – the latest proposed stock exclusions from GES, which screens companies for SRI factors on behalf of Nordic and UK institutions representing around 60 billion euros in assets, including Swedish government pension funds AP1 and AP7. GES was formerly called CaringCompany.
German chemical giant BASF has fallen foul of GES’s ‘Global Ethical Standard’, which is based on United Nations and other international environmental, human rights and ethical business standards. GES says this is due to the actions of BASF’s Micro Flo a subsidiary, which was prosecuted for smuggling and selling large amounts of illegal pesticides.
Fines against the group totalled more than one million dollars and the incident violated both the UN Global Compact and the environmental guidelines of the Organisation for Economic Cooperation and Development.
Japanese finance group Nomura has been excluded after a report from the International Labour Organisation (ILO), the UN agency for social and labour standards, damned discriminatory policies against women regarding employment and career opportunities at its Nomura Securities unit.
The company was convicted for these practices by a Japanese court in 2002.
Magnus Furugård, managing director of GES Investment Services in Stockholm, says that once a possible company exclusion is proposed a letter is sent to the firm ask them for their response.
“It’s up to the company, but we try to encourage them to start a dialogue and get their input, we may also meet them and hear what they are going to do to change the situation.
“Generally speaking we get a good response from the companies – not from all though. The next level is whether they are prepared to take action and there is also differences between company reactions.”
According to Furugård, GES policy follows the UN Global Compact and OECD guidelines and sources information from different UN bodies such as the ILO but also various non- governmental organizations (NGOs) with a global coverage.
“We would also like to have other sources though because NGOs can have their own angle, so we are striving for a legal case or other institutional bodies who can ratify these principles.”
The difficulty in sourcing this information is apparent in the return of Sears from a period of exclusion from the GES lists.
After dialogue with the company, it was discovered that accusations of association with human rights abuses at a plant in American Samoa had been had been incorrectly reported by the US Departments of State and Labour.
“The company responded with dialogue where it became clear that they had spoken with the US State Department and we got confirmation of that.
Furugård says he hopes that this did not adversely affect Sears’ business: “I think this is a lesson that we have learnt here too, which is to try and have many possible sources. This means also that the dialogue between the companies and the sources has to be very strong and we have been looking to improve this over the last six months.”
He adds that GES is currently following up the dialogue on these 25 new exclusions, but notes this is a small number of companies compared to the 4,000 strong universe that GES researches.
“There are two clear trends here. One is that there is much more information out there today. The second is that companies are much more interested in addressing these issues.”