Published by Agenda Week, a Financial Times service.
A small investor group has been pressing mutual funds, and their public parent companies, in some cases, to ban investments in companies that are tied to ongoing human rights violations.
This week, shareholders in six Franklin Templeton mutual funds voted on an anti-genocide proxy resolution, and another vote will take place on Dec. 15. While none of the funds had a quorum — enough investors to formally vote on the proposals — the issue shouldn’t be dismissed by public company directors. The shareholder group, Investors Against Genocide, has in recent years begun sending proposals to funds’ public parent companies, and as ESG gains more attention among millennials and institutional investors, the issue could garner more scrutiny.
Investors Against Genocide wants Franklin to divest of investments in China’s largest oil producer, PetroChina. The parent company of PetroChina — state-owned China National Petroleum Corporation or CNPC — is a major source of trade for the government of Sudan. Yet in 2009 the International Criminal Court indicted Sudanese president Omar al-Bashir for directing an army campaign that killed thousands of non-Arab citizens in the Darfur region. The court does not have the ability to arrest al-Bashir.
Such companies as BlackRock, JPMorgan Chase and Voya Financial have received and voted on shareholder proposals, while American Funds, Fidelity and Vanguard mutual funds held votes on the topic.
And it appears the issue isn’t going away.
“We are not asking [companies and funds] to become [strictly] socially responsible investors,” says Eric Cohen, founder and chairman of the advocacy group. “We just want them to make an effort to avoid investments in cases of extreme human rights violations. And there is no human rights violation more extreme than genocide.
“We’re asking them to be in the game when the worst crimes on the planet are happening,” Cohen adds.
Cohen presented the proxy resolution on Oct. 30 at Franklin Templeton’s shareholder meeting in San Mateo.
Franklin management opposed the resolution. In its proxy statement, the company states, “The conditions in the Darfur region of Sudan are deplorable, and we support efforts toward positive and meaningful reform there.
“However, identifying the best way to achieve change continues to be a matter of serious debate… In our more than 25 years of experience investing in emerging markets, we have seen that fostering economic and business development through investment can often help in achieving reforms.”
Cohen’s organization has been filing similar resolutions against fund families or their public-company parents since 2008 with varying results.
Last year, nearly 32% of shares at a Fidelity bond fund voted in favor of the divestment the group is calling for. Two years ago, 25% of shares at a Templeton emerging-markets fund supported a similar proposal.
By the same token, anti-genocide votes at other funds have yielded single-digit support.
Matt Walsh, a Franklin spokesman, writes in an e-mail that Franklin shareholders haven’t been supportive of the measures. According to Franklin, “[s]ubstantially identical proposals were submitted going back several years now that resulted in overwhelmingly majority votes of shares against the proposals (or abstentions).”
