Big fund firms starting to focus on human rights

Associated Press | 5/13/2009, 5:02 a.m.

The financial disclosures that investors get in the mail from mutual fund companies don’t normally capture Nancy Prindle’s attention.

Then again, the dry brochures rarely delve into anything as gripping as the bloodshed in Sudan’s Darfur region — a topic that has inspired action from Prindle, a woman from Delaware, Ohio, who counts a handful of Vanguard Group funds in her retirement nest egg.

“I don’t have any idea what ought to be done in Sudan, but I don’t want to help fund what is going on,” Prindle said about the conflict in Darfur, where the United States accuses the Sudanese government of committing genocide.

The 63-year-old educational consultant said she was “horrified” when she learned recently that five Vanguard funds invest in a Chinese company exploring for oil in Sudan.

So Prindle cast a yes vote on an activist-backed proxy ballot proposal on human rights that Vanguard mailed to millions of its investors, leading up to a July 2 special shareholder meeting in Scottsdale, Ariz.

A handful of large fund companies — among them, T. Rowe Price Group Inc. and TIAA-CREF — are now confronting and even embracing the idea that they should screen out investments that may be linked to human rights abuses abroad.

The willingness of some big mainstream companies to address issues they once tried to avoid is creating new options for investors. In the past, the big players mostly left socially responsible investing to boutique firms whose funds aren’t typically included in employers’ 401(k) plans.

“Common sense tells us that a lot of large asset managers, 401(k) plans and the household names in the investment world are not going to want to be seen as ignoring the attention that’s being focused on issues like genocide in Sudan,” said Jane Meacham, a research analyst with RiskMetrics Group, a financial risk management firm.

Vanguard says it’s recently begun screening companies across all its 157 funds to identify any company “whose direct involvement in crimes against humanity or patterns of egregious abuses of human rights could warrant engagement or divestment.”

The activist-backed ballot measure affects 30 Vanguard funds. It would go further than the company’s screening policy, requiring Vanguard to “institute procedures to prevent holding investments in companies that, in the judgment of the board, substantially contribute to genocide or crimes against humanity.”

The Vanguard proxy campaign is led by Boston-based Investors Against Genocide. The nonprofit says the proxy measure is needed because, even though Vanguard has a screening policy, the company has continued investing in a company that’s a lightning rod for activists.

Vanguard’s latest holdings reports, as of March 31, list five funds with shares of PetroChina Co. The company’s oil exploration in Sudan provides revenue to the African nation’s government — money that activists say perpetuates an ethnic-rooted conflict that the United Nations estimates has killed 300,000 people, and forced 2.7 million to flee their homes.

Vanguard says the proxy proposal duplicates its existing policy. Spokeswoman Linda Wolohan called Vanguard’s holdings in PetroChina and its parent, China National Petroleum Corp., “modest,” accounting for less than 1 percent of each of the five funds’ portfolios. The largest fund with a PetroChina stake is Vanguard Emerging Markets Stock Index, which has $14 billion in assets.