An organization advocating divestment from companies that support the economies in countries perpetrating genocide won an initial victory in bringing their cause to the fund boards of more than two dozen Fidelity funds.
An organization advocating divestment from companies that support the economies in countries perpetrating genocide won an initial victory in bringing their cause to the fund boards of more than two dozen Fidelity funds.
Investors Against Genocide was given the go-ahead by the Securities and Exchange Commission's division of investment management to include a resolution on fund proxies.
The Boston-based activist group worked with 24 volunteers who are shareholders in about 28 different Fidelity Investments funds to re-quest placement of a resolution about "genocide-free investing" on fund proxies to be distributed to all shareholders of those funds at the next scheduled meeting.
The resolution asks the fund boards to adopt policies to screen out investments in companies that support governments that conduct genocide, such as in the Darfur region of Sudan.
"We are asking them to have procedures to avoid investing in companies that substantially contribute to genocide or crimes against humanity," said Eric Cohen, chairman of Investors Against Genocide. "And we are asking them to either avoid buying shares in PetroChina Co. Ltd. of Beijing or, if they discover they have, take actions to remedy that."
The group grew as a project of another organization, the Massachusetts Coalition to Save Darfur, a group of Massachusetts organizations aligned with the Save Darfur Coalition in Washington. Investors Against Genocide became focused on PetroChina, an oil company doing business in Sudan, after researching the issue for the larger statewide effort.
VANGUARD ALSO TARGETED
In addition to the 28 Fidelity funds, the group has sent letters making similar requests to other firms, including some 30 funds at The Vanguard Group Inc. of Malvern, Pa., T. Rowe Price Group Inc. of Baltimore, Barclays Global Investors of San Francisco, and Franklin Resources Inc. of San Mateo, Calif.
The group has some 10,000 supporters nationwide, Mr. Cohen said. "We're trying to put the resolution on as many funds as we have volunteers to do it," he said.
Boston-based Fidelity challenged the proposal when it was submitted last fall, arguing that the measure would have an effect on how the company conducted ordinary business.
"Although the SEC staff has not concurred with our position, we continue to believe that the proposal deals with matters relating to a fund's ordinary business operations, and contains false and misleading statements," said Fidelity spokes-man Vincent Loporchio. "The SEC rules permit the exclusion of shareholder proposals if they meet those criteria."
Vanguard has also communicated with the group but has no plans to divest in several funds that have been targeted.
"Vanguard is frequently asked by clients to divest from stocks, for a variety of reasons — from environmental and social issues to humanitarian and political concerns," said Vanguard spokesperson Rebecca Cohen. "We simply cannot manage investment portfolios in an effective manner that would address all of these issues while fulfilling our fiduciary obligation to shareholders to produce the highest possible investment returns."
PetroChina is also among the holdings of several Franklin Templeton Investments of San Mateo, Calif., spokesperson Stacey Johnston said in a company statement.
"Our investment professionals will continue to actively engage company managements when they have any concerns with company management or their activities, and PetroChina is no exception to this approach of engagement," she said in the statement. "As an investment adviser, our fiduciary responsibility to our fund shareholders is to make investment decisions that are consistent with the guidelines in each fund's prospectus."
Investors Against Genocide doesn't expect to garner overwhelming support from shareholders for the resolution.
"We expect to lose in the beginning," Mr. Cohen said. "We are looking forward to the day when people in large numbers will notice the problem and vote with their values, and it will be in favor of genocide-free investing."
The SEC decision does not reflect a vote by the commission and does not set a precedent for future decisions, said SEC spokesman John Heine. "The request may be different enough to result in a different outcome," he said. "The opinion may change. It will be looked at on a case-by-case basis," Mr. Heine said.
If additional companies submit challenges to the request, Mr. Cohen said, the group will respond to the SEC. "It's certainly good for us that the SEC has already ruled once in our favor," he said.
Sue Asci can be reached at sasci@crain.com.
