GLOBAL - A group of 12 institutional investors representing $2.7trn (€1.9trn) in assets under management has called on companies and their shareholders to pay more attention to the challenges of doing business in Sudan ahead of the independence of South Sudan from the North.
The group, part of the Sudan Engagement Group (SEG), warns that risks remain as peace and human rights are still vulnerable.
Bill McGrew, portfolio manager at the California Public Employees' Retirement System (CalPERS), said: "It is very early, with much at stake in this region. Company exposure to this evolving state could pose additional risks to business, local society and our portfolios, and as fiduciaries, we want to better understand these risks, including company efforts to acknowledge they are not neutral actors in conflict-affected countries."
Since 2008, the SEG has been actively engaging with investee companies operating in Sudan, encouraging them to develop policies and procedures for engagement with investors and be open to discussing concerns as outlined within the UN Global Compact-PRI 'Guidance on Responsible Business in Conflict-Affected and High-Risk Areas' report.
The SEG also encourages companies to communicate more effectively on business operations in the country, act responsibly, recognise their role as a corporate citizens and promote transparency on oil revenues.
The group said it has held productive talks with a number of portfolio companies that are committed to operating in a responsible manner in Sudan, including Schlumberger, Total and Petrofac.
Lara Yacob, senior engagement specialist at Robeco Asset Management, said: "We expect our portfolio companies to be an influence for good where they operate by conducting themselves with propriety and with a view toward responsible corporate conduct.
"If any improper business practices come into being, companies should move decisively to eliminate such practices and introduce adequate controls to prevent recurrence."
According to the SEG, in the short term, companies should commit to supporting post-Comprehensive Peace Agreement resolutions between the North and South that forge a lasting peace, address equitable agreements on sharing of wealth, enable sustainable utilisation of oil resources and promote consultation of the local communities.
They should also engage in dialogue with the government, investors, communities and other stakeholders on a sustainable long-term future business environment following southern Sudan's secession.
In this context, the SEG strongly encourages companies such as CNPC/PetroChina, Sinopec, ONGC and Petronas to work with their investors, the government, the community and other stakeholders to address risks and opportunities associated with operating in Sudan.
Supporting signatories include APG, Aviva Investors, BC IMC, CalPERS, Hermes Equity Ownership Services, Local Authority Pension Fund Forum, Mn Services, New Zealand Superannuation Fund, PGGM Investments, Robeco, The Co-operative Asset Management and Universities Superannuation Scheme, all of which are signatories to the UN Principles for Responsible Investment.