With Great Power Comes Great Responsibility

Large and prominent investors who invest globally have been under pressure to make what is known as Socially Responsible Investments (SRI). However, even those investors that profess to do SRI are finding their investments coming under increasing public scrutiny and criticism.

In recent years, a number of issues that are subject to strong negative public opinion include:
• Environmental issues
• Social Issues
• Human Rights Issues

Some recent instances when investors had to defend themselves:

Warren Buffett had to write a letter to shareholders of Berkshire Hathaway to defend his investment in Petrochina, whose parent Sinopec is operating in Sudan. (www.berkshirehathaway.com/sudan.pdf). Sudan has been under increasing international pressure for the Darfur crisis. Of course, Warren Buffett is an American capitalist. Petrochina shares have gone up 5 times since his investment!

Norges Bank Investment Management, a leading global investor, is the investment arm of the Government of Norway. In order to secure the future of the country, the government has focussed on converting petroleum assets in Norway into financial assets worldwide, under a fund called The Petroleum Fund, and subsequently renamed to Government Pension Fund. This fund has assets of over USD 300 billion dollars. The Fund has drawn up a list of blacklisted companies in which it cannot invest. The Fund has drawn criticism for blacklisting Wal-Mart, purportedly for child-labour violations.
www.iht.com/articles/2007/05/02/business/norway.php

These instances show that investors need to be treading carefully on these fronts. They need to learn from the advice Spiderman got “With great power, comes great responsibility”.