Published by Ignites.

By Mariana Lemann

TIAA-Cref yesterday announced its divestment from four companies with ties to genocide in Darfur, Sudan.

The sale of all of its holdings, worth about $58 million as of the end of September, in four companies that maintain business relations with the government of Sudan is the result of a campaign TIAA-Cref launched in March of last year. TIAA-Cref had come under pressure from the activist group Investors Against Genocide to divest.

At that time, TIAA-Cref announced plans to intensify pressure on five companies connected to the Sudanese government. The firm sought meetings with PetroChina, CNPC Hong Kong, Oil and Natural Gas Corporation, Sinopec and Petronas.

TIAA-Cref has not divested from Petronas, taking into consideration that the firm has acknowledged TIAA-Cref’s concerns and engaged in dialogue about how it might address them.

TIAA-Cref has been engaging for years with a number of target companies with business and operations in the Sudan and was able to persuade some companies to take steps in the Sudan to improve the situation, says Hye-Won Choi, head of corporate governance at TIAA-Cref. “But our conversations with these particular companies were not fruitful and we believe required a different step,” she says.

TIAA-Cref considered the progress of these discussions insufficient to sustain continued dialogue with four of them: PetroChina, CNPC Hong Kong, Oil and Natural Gas Corporation and Sinopec. Therefore, TIAA-Cref sold its holdings in those companies across all funds and accounts as of Dec. 31, 2009.

“Our strong internal bias is in favor of engagement over divestment,” Choi says. “We don’t take divestment lightly and it is a measure of last resort, after other potential remedies have been exhausted.”

The move was applauded by Investors Against Genocide.

“Here we have an example of a very large player, a $400 billion asset manager, who is demonstrating a clear commitment to be genocide-free,” says Eric Cohen, chairman of Investors Against Genocide. “[TIAA-Cref] are recognizing the problem and they are taking appropriate action, so they are respecting what we think is the overwhelming desire of ordinary Americans… which is to have no connection to the genocide.”

As it praised TIAA-Cref, Investors Against Genocide issued a challenge to other mutual fund companies that remain invested in companies with ties to Sudan.

“We challenge Vanguard, American Funds, Fidelity and Franklin Templeton to live up to the standard that we see set by TIAA-Cref,” Cohen says.

In March, Vanguard announced a formal procedure for regular reporting to the funds’ trustees on companies in which it invests “whose direct involvement in crimes against humanity or patterns of egregious abuses of human rights would warrant engagement or potential divestment,” according to a proxy filing.

Investors Against Genocide viewed Vanguard’s move as an indication that it might sell its holdings from the companies tied to the genocide in Sudan.

But the nonprofit organization claims that while Vanguard highlighted engagement and divestment as possible actions for the trustees to consider, it has increased its holdings with the companies in question.

Vanguard’s SEC filings on Dec. 30, 2009, show that its holdings of PetroChina were 359 million shares, and its holdings of CNPC were 24 million shares, according to Investors Against Genocide. At the end of March, Vanguard held 188 million shares of PetroChina and 20 million shares of CNPC, according to Investors Against Genocide. Vanguard did not confirm these figures.

“In general, companies do not want to talk to us,” Cohen says. “Because of that we have introduced a shareholder campaign to submit shareholder proposals to the mutual fund [companies] asking that the board of trustees institutes policies to avoid investments in companies that they know contribute to genocide.”

Investors Against Genocide also has targeted Fidelity, American Funds and Franklin Templeton because of their investments in companies that are linked to genocide.

“What we see from Fidelity, but it is also true of Vanguard and American Funds, is that they don’t claim that they have to invest in PetroChina because it is a better investment, they just claim that it is legal and they can,” says Cohen.

Vanguard declined to comment on Investors Against Genocide’s statements about the firm. Nonetheless, Vanguard spokeswoman Linda Wolohan writes in an e-mail response to questions that “shareholders voted against a proposal calling for the divestment of the stocks of certain companies and restrictions on the future purchase of such securities at Vanguard’s shareholder meeting held July 2, 2009. An average of 89% of shares voted were against this proposal.”

Fidelity did not comment, but made reference to its investment policies related to Sudan on its website.

Investors Against Genocide also highlighted that iShares announced that it will develop an iShares Genocide-Free Exchange Traded Fund that will rely on a third-party index provider to screen out genocide-linked companies.