MP Pension, Denmark’s pension fund for academics employed in the public sector, has published a list of additional countries it will now no longer invest in due to systematic human rights violations. Of particular focus is Saudi Arabia, following the assassination of journalist Jamal Khashoggi and the country’s ongoing war in Yemen.
The countries – Saudi Arabia, Bahrain, Ethiopia, Mozambique, Papa New Guinea, Tajikistan, Rwanda, Thailand, Benin, Burundi, Comoros, Congo, Iran and Swaziland – have been excluded from MP Pension’s investments, meaning it will have to re-deploy DKK 400 million over the next months, including investments in government bonds as well as in companies controlled by national governments.
“This approach is probably the financial industry’s most consistent criteria for accountability,” said MP Pension investment manager Anders Schelde. “We have worked with this area for quite a long time but the time has come to strengthen the impetus for respecting human rights.”
MP Pension consults with external analysts that allocate points to countries globally on a wide variety of areas. For a decade the pension company has analysed countries’ approach to the environment, human rights, good governance and corruption every quarter, after which individual country analyses are applied.
The additions to the list join Afghanistan, Central African Republic, Chad, the Democratic Republic of Congo, Eritrea, Guinea-Bissau, Haiti, Libya, North Korea, Somalia, Sudan, South Sudan, Syria, Turkmenistan, Yemen and Equatorial Guinea as countries excluded from the fund’s activities. A full list of excluded companies and countries can be found here. MP Pension also decided earlier this year to stop investing in oil, coal and tar sands.
Saudi Arabia had long been in MP Pension’s crosshairs, Schelde explained, but the assassination of Washington Post journalist Jamal Khashoggi at the Saudi Arabian consulate in Istanbul last October undeniably influenced the decision to exclude the country.
“Just as we have redesigned our selection process, Saudi Arabia in particular stands out as a country with unacceptably low [human rights] standards. So we have become more absolute in our approach to countries we can justify investing in,” Schelde said.
“The case of Khashoggi is so recent that it was not included in the last data set we received from our analysts. But when we do our qualitative assessment of countries, this case is a clear example of the massive challenges in Saudi Arabia in terms of human rights, crossing the t’s and dotting the i’s,” he added.
On the other hand, the challenges for a pension fund like MP Pension come to fore when it comes to a market like China, which it cannot not invest in despite the country’s decidedly chequered human rights record. According to Professor of Financial Management Per Nikolaj Buch, this is still the right decision because MP Pension makes investment decisions on a transparent and accountable basis.
“Human rights are a complex matter to penetrate, so it sends a bigger signal when a larger-scale pension fund chooses to get involved in that debate. But China is a big market where major companies are listed, so if you exclude a country like China, then you risk developing an increased risk profile and reduced returns in the longer run. One must also be able to balance,” Buch postulates in the Danish daily Berlingske.
Dragging Their Feet?
Meanwhile, other Danish pension funds including PFA Pension, Danica, Industriens Pension and PensionDanmark are rejecting similar measures to MP Pension’s Saudi Arabia government bonds divestment for the time being, despite calls from Amnesty International and Mellemfolkeligt Samvirke, a human rights organisation.
“Saudi Arabia is currently prosecuting a war in Yemen where government bonds are probably being used to bomb innocent people,” said Mellemfolkeligt Samvirke political chief Lars Koch.
PFA Pension says it is “closely following” the situation in Saudi Arabia “[b]ut we have not chosen to exclude the country at this time,” said PFA Head of Responsible Investments Andreas Stang.
PensionDanmark will assess its Saudi government bonds investments at a forthcoming meeting, according to Investment Director Claus Stempe.
Lægernes Pension says it will reassess its Saudi investments in light of MP Pension’s exclusion. “It is our assessment that Saudi Arabia does not meet the criteria for countries we want to invest in. We have therefore asked our screening agency to look into the matter further,” said CFO Niels Elmo Jensen.