Financial Times: Investors tick the box and go ‘terror-free’

EXTRACT: “Why can a company like Shell have a gas station on every corner in the US while simultaneously investing in Iran?”

By Guy Dinmore
Published: March 22 2007 02:00 | Last updated: March 22 2007 02:00

With a stroke of the pen and a tick of the box, the US public is being urged to help bring down enemy regimes by going “terror-free” with investments.

Foreign companies doing business with Iran are the main target of the campaign, which aims to persuade US investors to sell stocks in such companies, valued at billions of dollars.

The “terror-free” movement has the blessing of the families of victims of the attacks on September 11 2001, religious believers, neo-conservatives and the most powerful Jewish lobby group, the American-Israel Public Affairs Committee (Aipac).

It is spawning a new industry of advisers, lobbyists and politically correct investment funds, and may result in fresh legislation from Congress. “We believe in the power of taking up a good and righteous fight,” Sarah Steelman, the Missouri state treasurer who has become the public face of the campaign, told excited audiences at Aipac’s annual meeting this month. Last year,the Missouri Investment Trust became the firstpublic agency in the USto implement a terrorism-free investment fund.

Several states have since passed or are about to pass legislation requiring their public funds to divest from companies doing business with countries on the State Department’s rogues’ gallery of alleged state sponsors of terrorism – Iran, Syria, Cuba, North Korea and Sudan. Ms Steelman hired Conflict Securities Advisory Group (CSAG), which has identified some 485 companies with links to terrorism-sponsoring governments. “We provide the criteria and then they provide us the list,” she told the meeting.

Through a tender, Boston-based State Street Global Investors was awarded the portfolio management. The Roosevelt Anti-terror Multi-Cap Fund, set up in 2005, is one of the mutual funds used that provides a “terror-free” certification. That fund will soon be available to investors ticking the appropriate box in Missouri’s 529 College Savings Advisor Plan.

Ms Steelman said top of the sin list was BNP Paribas, for its loan business with Iran. She said they had “kicked off” UBS as broker, noting that the investment bank had since severed business with Iran. At another public appearance, Ms Steelman also named Total and Royal Dutch Shell for their investments, as well as”Halliburton-type” companies in the US that do business with Iran through subsidiaries. Coca-Cola was not her priority, she said, in spite of its production through licence in Iran.

Debra Burlingame, whose brother was the pilot of flight 77 before it was hijacked and crashed into the Pentagon on September 11 2001, hopes institutions will respond to the demand. “If Wall Street can create indexes for environmental issues . . . they can certainly do it for this.”

Leah Odinec, a senior Aipac official, says the lobby group is supporting proposed legislation that would require federal pension plans to divest from companies with more than $20m invested in Iran’s energysector. “Why can a company like Shell have a gas station on every corner in the US while simultaneously investing in Iran?” she asked.

The State Department is opposed to the legislation, saying it would punish allies when the US is seeking to preserve coalitions. Several analysts critical of Aipac, who asked not to be named, said they believed the sanctions strategy was aimed at destroying any environment for negotiations with Iran. Some State Department officials, speaking in private, share that view.

Democrats in Congress, who see sanctions as a better option than another war, are embracing the campaign. At a hearing of the Senate banking committee yesterday, Chris Dodd, a Democrat presidential candidate, told administration officials they had to “get a lot tougher” with Tehran.

California’s Brad Sherman, chair of the House terrorism, nonproliferation and trade subcommittee, says he wants to “hit that Achilles heel” of the Iranian oil sector and wants the Treasury to “name and shame” energy investors. But he would like to exempt US companies that sell medicine and agricultural products to Iran.

Frank Gaffney, a former Pentagon official and a well-known Washington neo-conservative who runs the divestterror.org campaign, analysed the pension funds of the 50 US states with CSAG. They say that the top 100 pension systems invest from 15 to 23 per cent of their portfolios in companies that do business in terrorist-sponsoring states. They identified 73 companies with ties to Iran, 24 to Libya, 26 to Sudan, 31 to Syria and nine to North Korea.

Copyright The Financial Times Limited 2007