WHAT IS DIVESTMENT?
Summary
Action in Sudan, in conjunction with the Darfur Action Coalition of Wisconsin (DACW) is a lead organization for the Wisconsin Sudan Divestment Campaign, an effort that is part of the Sudan Divestment Task Force (SDTF) which manages Sudan divestment policies on the national level. To date, twenty-seven states have adopted divestment policies. The concept of Sudan divestment is to bring about economic pressure on the Government of Sudan by targeting divestment of specific publicly traded companies that support the Government’s genocidal actions in Darfur. Research has shown that despite its current screening practices the State of Wisconsin Investment Board has approximately $110 million dollars of public pension money invested in targeted companies. For a detailed policy analysis of Targeted Divestment please visit the SDTF website.
Divestment is the opposite of investment. Instead of taking a sum of money an placing it into an institution to gain capital, money is taken out to place economic pressure on that institution[1]. Here we are primarily concerned about divesting from international corporations that are invested in the Government of Sudan(G.O.S.) in order pressure it to take responsibility for the atrocities happening in Darfur, Sudan.
How does divestment work?
When someone divests from a company, that company's share prices fall. While one divestment may not be enough to entice a company to remove itself from the offending situation, an entire divestment movement by many entities will cause a dramatic decrease in demand for company shares. As shares fall that company has two choices (or a combination of the two) to prevent further depreciation of holdings:
1. Remove the offense: In our case this means the company would pressure the G.O.S. to alleviate the conditions in Darfur.
2. Leave the situation entirely: Forego any operations in Sudan, leaving the G.O.S. with one less source of income via taxes or contract.
Note: Many companies will often remove their direct ties and circumvent 1 and 2 by adding a middleman to the situation. This is a costly transition for both the company and the G.O.S. which lowers profit margins while raising prices. Either way, the economic pressure is there. [2] [3]
History of Divestment
The most prominent historical example of divestment from any institution is the divestment from companies doing business with South Africa during the Apartheid. More specifically there were 96 companies which divested from S. A. in 1986. As explained above, 42 of these companies were forced to circumvent direct investment in South Africa. It is important to note that there was still unlimited access to US goods during this time. For this reason, the South African model of divestment was labeled as poorly implemented and ineffective. [3]
Furthermore, Sudan is historically responsive to economic pressure. Most significantly, the G.O.S. recently took out a one million dollar ad in the New York Times to express the value of investing in Sudan. This is viewed as a direct response to the current divestment movement according to Darfur cxpert Dr. Eric Reeves. He notes,
The fact that the regime is responding so distinctly to the movement means they certainly understand the implications.
Problems with divestment
Many argue that divestment economically hurts those at the bottom at the economic spectrum while those at the top (who are also the desired targets of divestment) are left unscathed. This is true of blanketed divestment which occurred in the South Africa anti-apartheid divestment movement. Many of the poorest were left with little, if any, access to medical supplies. For this reason Action in Sudan, in agreement with the Sudan Divestment Task Force, believes a Targeted Divestment approach is more suitable.
Targeted Divestment
Targeted Divestment is different than general divestment because it places force on the desired target (GoS) while minimizing the potential collateral damage to the refugees of Darfur and the impoverished Southern Sudanese. It only targets certain companies that have been identified as "offending companies", like Petrol China, while leaving other companies alone, such as GE Medical. It targets companies that are directly supporting the GoS and not companies that are working in Southern Sudan or aid organizations working in Darfur.
Who decides which companies are targeted and how do they come to these conclusions?
The Model Legislation (i.e. the legislation created and recommended by SDTF) makes it clear who to target. Here is an explanation of how the bill, which is what the WI bill is based upon, works:
After the bill is passed The State of Wisconsin Investment Board will have 90 days to comply in the following way:
1. They will be required to compile a list of targeted companies. A company is targeted if it...
- has more than 10% of its assets in Sudan and less than 75% of those assets are contracted out via the southern regional government of Sudan
- is complicit with the genocide
- provides offensive military equipment to the Government of Sudan
This protects the impoverished citizens and reconstruction efforts of Southern Sudan as well as any beneficiary in need of basic human necessity while targeting the pocketbook of the Sudanese Military.
2. SWIB will engage with the companies warning them that they have 1 year to change their ways in compliance with the above rules before divestment takes place.
This ensures that engagement is the first step taken and that any company has a chance to right any wrongs it has done.
3. SWIB will re-evaluate the status of the list of targeted companies every quarter of the year.
This will ensure that the list of targeted companies is up to date.
4. Exemption: If SWIB can show that .5% of its total assets would not have been lost had it not divested, it may change resume investing to protect its Fiduciary Responsibility to the state employees of Wisconsin. [4]
Wisconsin's Divestment Status
There is a bill sponsored by Senator Sheila Harsdorf and Representative Fred Kessler which was introduced in both the Wisconsin State Senate and the Wisconsin House Assembly. While it has not been assigned to a committee in the assembly, the bill has been given to the Finance Committee for Review in the Senate.
Just before the end of the last session, Congress passed a non-binding resolution that legalizes the bill we placed before Congress last year. This means that any questions of the legality and constitutionality of the bill are no longer in question. This should make it substantially easier to get the bill to pass when Congress is back in session.
Wisconsin's State Pension Funds
The State of Wisconsin currently is the 4th Largest Fiduciary in the Country, with total assets at around 88 billion dollars. The total amount of that 88 billion, estimated by the Sudan Divestment Task Force to be invested in offending companies, is 110 million. This is a small number in respect to the total assets of Wisconsin, only .125%, yet a very large number in the scope of Sudan.