March 16, 2009
Investment in PetroChina Will Be First Test Case for Vanguard's New Policy on Genocide
by Robert Kropp
Investment management company promises to monitor its mutual funds for investments in companies
that contribute to genocide and other crimes against humanity.
In response to a shareowner proposal filed by Investors Against Genocide (IAG) and others,
requesting that it institute procedures to prevent holding investments in companies that contribute
to genocide or crimes against humanity, the Vanguard
Group of mutual funds has formalized a process to monitor its mutual funds for investments in
Investors Against Genocide is a non-profit
organization dedicated to convincing mutual fund and other investment firms to change their
investing strategy so as to avoid complicity in genocide. Its shareowner proposal "raises the issue
of the fundamental management responsibilities of financial institutions and whether shareholders
should be able to expect mainstream funds to be genocide-free," according to IAG.
recognition of the problem of investing in genocide has also grown, according to the group, and
plans are underway for formal Congressional committee hearings on genocide-free investing in 2009.
In the Vanguard trustees' response to the shareowner proposal, they recommend that
shareowners vote against the proposal "because it calls for procedures that duplicate existing
practices and procedures of the Vanguard funds." But in their SEC filing, the trustees also
"directed Vanguard to implement a formal procedure for regular reporting to the trustees on
portfolio companies whose direct involvement in crimes against humanity or patterns of egregious
abuses of human rights would warrant engagement or potential divestment."
demonstration of Vanguard's new policy may be in the upcoming filing that will show the holdings of
Vanguard’s Emerging Markets Stock Index Fund. The most recent available SEC filing for this fund
shows it owning 149,630,899 shares of PetroChina, which by its business dealings with Sudan fails
to respect human rights and avoid human rights violations in Darfur, according to IAG.
Investors Against Genocide will hold discussions with Vanguard to determine whether the
shareowner proposals for genocide-free investing will be withdrawn from the proxy statement in
light of Vanguard's new policy. IAG considers PetroChina to be a good test case because it is
widely considered the worst of the companies that provide funds that the Government of Sudan needs
to carry on the genocide in Darfur.
SRI World Group, Inc. All Rights Reserved.