Natural Resources and Violent Conflict - WaterWiki.net

attracting reputable companies 303has involved only a small minority of companies, but it has damagedtrust in the entire corporate world. Restoring trust must be the top priorityfor major businesses. . . . Transparency is the key to restoring trust”(Browne 2002, p. 34). The need for transparency applies to companies’activities both in developing countries and in Western markets.Activist Shareholders and Socially Responsible Investment. Therise of the market for socially responsible investment since the 1990shas given greater weight to shareholders’ ethical concerns, includinghuman rights.Early ethical investment funds in the 1980s tended to operate on theprinciple of screening out “unacceptable” companies, for example,those involved in the tobacco business. The current trend is more forethical investment fund managers to engage with target companies andencourage them to improve their policies. Fund managers have arguedthat they have both a right and a duty to engage with companieswhose policies—or lack of them—may incur ethical problems, whichin turn may incur risks to their investments. The size of the funds’shareholdings gives them influence. One asset manager comments thatcompanies may not welcome her calls, “but at least they pick up thephone.” 11In December 2001 a group of eight fund management companies,who between them managed some £400 billion, issued a joint statementexpressing concern about companies with investment in Burma(Myanmar). 12 Many of the issues raised apply to other countries aswell. They included the possibility that “companies operating in unstablepolitical climates can be exposed to loss of shareholder confidence,negative press and publicity campaigns, safety risks, and corruption.”The statement did not call for divestment, but it did call on companiesto establish “effective policies and procedures” to manage the risk, forexample, by publishing verified social impact assessments.A more recent initiative by ISIS (formerly Friends, Ivory, and Sime)includes the copublication of a report in July 2002 entitled ChangingOil: Emerging Environmental Risks and Shareholder Value in associationwith the World Resources Institute (ISIS and World ResourcesInstitute 2002). The report argues that oil and gas companies aregiving insufficient attention to their exposure to environmental risksand that this will result in diminished shareholder value over the nextdecade unless they take prompt action.While the general trend among ethical investment funds is towardengagement rather than screening, managers retain the option of withdrawinginvestments from companies that are judged to fall below standard.In January 2003 Henderson Global Investors, which managesassets worth some £120 billion, withdrew its ethical investment funds