After Transformation of Sudan, Many U.S. States Still Keep Their Money Out

By: - October 25, 2011 12:00 am

The civil war was long and brutal, as rebel groups alleging anti-black apartheid took up arms against the Arab-dominated Sudanese government. Hundreds of thousands of people were killed and millions more were driven from their homes. The war-battered region called Darfur became a symbol of mass suffering.

Cutting off the government’s money supply — oil revenues collected from companies internationally — was seen as one way to stop Sudan’s bleeding. So human rights activists pressed large institutions to divest their holdings in the Sudanese government and in companies doing business with it, in hopes that the pressure would spark dialogue between the companies and the Sudanese government. A federal divestment law was enacted in 2007.

Along with national political leaders and college and university board members, state legislators were among those who heeded the calls to divest. In 2006, Jacqueline Collins, a Democratic state senator in Illinois, described her state’s first-in-the-nation divestiture law, passed in 2005, as a “moral imperative.” By 2009, 20 states had adopted model legislation calling for divestment of at least some public funds, and several more had crafted and passed their own laws, amounting to tens of billions of dollars pulled from companies doing business in Sudan.

But much has now changed there. The civil war is over and the new Republic of South Sudan, largely black, has been internationally recognized. The transformation of the region prompts the question of whether the divestment laws are obsolete. And, at a time when states face serious budget shortfalls and drained pensions, some feel they can no longer afford to invest in anything but the bottom line.

Despite the changes in Sudan, however, human rights groups say it’s not yet time to shift attention away from the country. One U.S. state has reversed course on divestment; others are reluctant to change their laws.

Shifting strategy

Has the wave of divestment been successful? The answer is yes, if you ask the Conflict Risk Network, one of the key groups that pushed divestment legislation. “It was a very powerful lever,” says David Kienzler, a policy analyst with the network. “Without that divestment legislation, there wouldn’t be that large a network thinking about it.”

Kienzler says human rights advocates have shifted their strategy from divestment to engagement — encouraging companies doing business in North Sudan to put pressure on the government to change its practices. The new focus is evidenced by a change in the name of Kienzler’s group, which was originally called the Sudan Divestment Task Force.

Some states with divestment legislation still on the books have followed suit, adding in engagement strategies. But that is not the case for one state, New Hampshire, which, amid fears that divestment would harm its public pension fund, has reversed its policy toward Sudan altogether.

New Hampshire passed divestment legislation in 2008. But it was never carried out. The law was suspended by the state’s superior court on grounds that it was unconstitutional for the legislature to interfere with investors’ duty to maximize returns. Though the state Supreme Court reversed the decision in 2010, New Hampshire’s legislature repealed the law this year, with a majority of legislators agreeing that divestment would cost too much.  

State Representative Ken Hawkins, a Republican who co-sponsored the repeal bill with Janet Wall, a Democrat, told Stateline he feared that divestment could have reduced market returns and that performing extra research on which companies to dump or avoid would have used up too much time and effort.

“It was a feel-good thing,” Hawkins says of divestment. “But when you’re dealing with a to billion pension fund….it’s just not practical.” Marty Karlon, of the New Hampshire Retirement System, says administering a divestment strategy would cost the state about ,000 per year.

Change of heart

South Dakota has had a very different experience. The state investment officer, Matt Clark, vehemently opposed a divestment bill when it came before the legislature in 2009. He said the bill would place foreign affairs above the concerns of stakeholders in the state pension fund.  The (Pierre) Capital Journal reported that Clark told the retirement system’s board of trustees, “To me this is a line in the sand that cannot be crossed, and we have to do everything possible to stop this.”

The bill failed in 2009, but the next year, instead of speaking out against its resurrection, Clark helped forge a compromise. It calls for the state to initiate a social activism policy with North Sudan, the remnant of the earlier Sudanese government. That means engaging with companies doing business there and using the lever of possible divestment if their practices don’t change.

Clark says the efforts have been modest, but have had some effect. His office has written letters — including one to the French conglomerate Alstom — and the companies have replied with explanations of their current projects and promises to shift future strategies away from close relations with the North Sudan regime. “It’s each of us using our own voice to collectively make an impact,” says Clark. “But no one knows whose voice tips the scales.”

Clark says the state saves money by relying on the research of other states, mainly Florida and Colorado, for lists of which companies to engage with. “This is just a way for us to be conscientious without harming our beneficiaries,” he says. 


But with civil war over and South Sudan now independent, does the strategy still matter? Human rights advocates say it does. With millions of people still displaced and with government-inflicted violence still occasionally flaring up in Darfur, a case can be made that engagement with companies over ties to North Sudan is still necessary. The North Sudanese government — but not South Sudan — remains on several federal sanctions lists in this country.

If Congress or the president removes all sanctions or makes one of several declarations about the North Sudanese government, including that it has halted genocide for at least one year, sunset clauses would be triggered in most state divestment legislation, eliminating the need for its repeal.

But in the meantime, says David Kienzler of Conflict Risk Network, states should continue pressing companies in North Sudan. He admits some policies may need tweaking — particularly to make sure that they don’t harm landlocked South Sudan, which runs mostly on oil revenues. The country has little agriculture and must get much of its food from the north.

“We’re working on that,” he says.

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