Making Good on A Promise: TIAA-CREF Divests From Companies Supporting Genocide

by Francesca Rheannon

Shareholder activism scores a victory as retirement fund giant cuts ties with four energy companies operating in Sudan.

The war in Sudan is not over. On the fifth anniversary of the Comprehensive Peace Agreement (CPA), that's the warning coming from a range of voices, from John Danforth and Lt. General Lazaro Sumbeiyo, chief mediators in the peace talks that yielded the CPA, to aid groups and anti-genocide activists.

The CPA was meant to end the civil war, develop democratic governance throughout Sudan and decide how the north and the south would share oil revenues. But an uneasy truce reigns that could explode at any time, as a report by aid agencies on increasing violence in southern Sudan attests.

A major sticking point is, of course, oil: most of it lies in the semi-autonomous, impoverished south, while the national government is based in the north. And China drills much of it. The energy-hungry emerging giant could encourage a lasting peace by bringing pressure to bear on Khartoum. But who is bringing pressure to bear on China to do this?

The U.S. based retirement fund company TIAA-Cref is, for one. It announced January 4 that it had sold all of its holdings -- some $58 million worth -- in four firms tied to the genocide in Darfur, including the three Chinese energy companies, Petrochina, Sinopec, and CNPC Hong Kong. The financial services giant is the first such company to divest its holdings in companies doing business in Sudan.

TIAA-Cref came under some pressure itself that helped move the company to this point. Boston-based Investors Against Genocide mounted an innovative shareholder activism campaign that took inspiration from the original shareholder activist movement -- the one against apartheid in South Africa. But it tweaked the model in a novel way. While the anti-apartheid movement focused on getting individual companies to stop doing business in South Africa, Investors Against Genocide decided to zero in on mutual funds, as organization's director, Eric Cohen, told me in an interview almost two years ago.

What's effective about targeting mutual funds is that it allows a broadening of the base of pressure, from individuals to large institutional investors. And it's popular: a study cited by Eric Cohen showed that 71% of respondents said they wanted their mutual fund to be free of genocide-tainted investments.

Proposing shareholder resolutions, Investors Against Genocide targeted a number of financial services companies, including Fidelity and Vanguard, as well as TIAA-Cref. The latter firm's director of corporate governance, Hye-Won Choi, defended it against IAG's accusations in May, 2008. He pointed to ongoing efforts to engage with 22 portfolio companies identified as having operations in Sudan. Choi wrote, "To date, nine companies-40 percent of those on our list-have either discontinued or committed to discontinue their operations in Sudan or have undertaken humanitarian steps. While we recognize that more work needs to be done, there is no denying that we have made real progress."

TIAA-Cref's own progress on taking genocide seriously was revealed in March of 2009, when it decided to ratchet up the pressure on portfolio companies "that maintain business relations with the Sudanese government to cease those relations or attempt to end genocide and ease suffering in Darfur." It gave the companies nine months to get their act together. If they failed, TIAA-Cref warned, it would pull its money out.

Time ran out December 31. The following week, TIAA-Cref made good on its promise. And Investors Against Genocide dropped their shareholder resolution. The company had lived up to its tagline: financial services for the greater good.