At the end of July, the US federal government passed bills in the House of Representatives that would provide legal protections to investment managers who sell holdings in companies involved in key sectors of Iran’s or Sudan’s economy.

Several weeks ago, Florida became the first US state to pass a law requiring their state pensions funds to divest from companies operating in Iran’s oil and mining sectors. Other states including Michigan, Texas, and Illinois are seeking to pass similar legislation.

This comes on the heels of a very successful Sudan divestment movement that started in Illinois and has since been implemented in various forms in over a dozen states.

The growing divestment movement has prompted many to wonder what roles these divestment movements accomplish, and where does KLD fit in?

Interestingly, support for both the Sudan and Iran divestment movements has come from all sides of the US political spectrum. Those who might consider themselves “hawks” feel both countries have long-standing terrorist ties and consider the governments aggressively militaristic. The hawks feel these countries pose a direct security threat to the United States and that our state pensions should not be implicitly supporting these regimes.

The “doves”, on the other hand, point to vast human rights violations that both governments very openly engage in. The Darfur situation is well documented (see Eric Reeves’ very thorough website www.sudanreeves.org).

While certainly not on the scale of Sudan genocide, Iran has much more than its share of human rights violations. The Amnesty International Country Profile for Iran is strewn with examples of repression of minorities, child executions, government sanctioned torture, and stoning executions.

While the hawk position is much more prevalent with regards to Iran and the dove position more so towards Sudan, a consensus is beginning to emerge in the U.S.—regardless of the reasons for opposing the regimes governing these countries—that divestment represents a socially and politically appealing method of registering this opposition.

It is important for the credibility of these movements that a high standard exists for determining the accuracy of which companies are violating the divestment statutes established by various states. This is where KLD comes in.

KLD has been at the forefront of working with institutional money managers and state pension boards in assisting them to be complaint with divestment legislation. KLD launched its first Sudan Compliance Product in November 2005.

In July 2007, KLD launched a second Sudan product with the endorsement of The Sudan Divestment Task Force. Both products list companies doing business in a country whose government condones (if not actively participates in) the horrible genocide taking place in Sudan’s Darfur region.

Recently, KLD started work on a new product to list global publicly traded companies doing business in Iran.

The primary reasons KLD has decided to take on this new research over the past two years are threefold:

1. Current KLD clients need this research and have asked us to create it.
2. Our long experience researching the human rights impact of publicly traded companies makes for a natural fit.
3. This type of research is clearly in step with the overall goal of sustainability investing by increasing accountability for the locations some companies choose to operate in.

Creating a quality list is not easy. The SEC recently shut down their website containing companies they deemed to be doing business in “terrorist sponsoring countries”. This is due to complaints the company lists were extremely inaccurate.

Is it all worth it? Does divestment change regime thinking? While the divestment movement was not the sole factor in ending apartheid in the 1980’s, it is widely acknowledged that the highly visible campaign kept South African oppression in the global public consciousness, and did play at least some role in pressuring the government to make sweeping reforms.

It’s too early to determine if corporate and world community pressure will have a similar effect on Sudan and Iran. It is true some companies and financial institutions are getting the hint.

Both Siemens and Rolls Royce have recently decided to close up operations in Sudan for political and moral reasons.

Fidelity recently divested 90% of its almost $500 million holding in PetroChina (a major player in the Sudanese oil industry). And, on the heals of all this, the recent House bills that call for divestment from Sudan, and Iran.

Will the threat of dropping stock prices through divestment, coupled with moral pangs cause other companies to follow suit? Will world opinion and loss of economic opportunity cause these countries’ leaders to shun those who cause misery both inside and outside of their borders? Let us hope so, but only time, and effort will tell.

KLD has over 19 years of experience in human rights research on publicly traded companies and applies this expertise on it current Sudan Compliance Products and its soon-to-be-released KLD Iran Compliance Product. Currently, over 190 money managers and state pension systems use one or both of KLD’s Sudan Compliance Products.