September 4, 2008
Everyone can fight in the economic war on terror. Investor activism and divestment, which was successful a generation ago against South Africa, gives investors the opportunity to take a political or moral stand against terrorism. Over the past few years, many investors have joined this movement by removing from their investments any company with business ties to Iran and Sudan; both are designated by the U.S. government as state sponsors of terror and, in Sudan’s case, a perpetrator of genocide. Just last month, investor activism resulted in the French conglomerate Total’s withdrawal from a lucrative natural gas project in Iran.
The ability to stage a 9/11-style attack, or worse, against the United States and other Western nations requires elaborate logistical and infrastructure support and significant financing of the type delivered by such state sponsors. As a matter of national security, it is essential that the economic war on terror focus on these countries and include the support of all Americans.
Divestment, when organized and deployed effectively, has been called by some experts among the most important strategic weapons of the 21st century, capable of harnessing trillions of investment dollars of Americans and American institutions across the United States.
The recent arrival of terror-free investment (TFI) products has taken divestment to another level, making it more accessible and efficient for individuals and institutions (and more effective).
Divestment can involve the disruptive and costly removal of companies from existing portfolios or investment products; as a tool for activists it has cost and performance limitations and has long faced market doubts regarding its effectiveness. That is why environmental activists do not promote the divestment of individual stocks, but rather support more sophisticated “green” investment products.
Having spent my entire 30-year career examining the nexus between national security and global finance, I can state unequivocally that terror-free investing can put debilitating pressure on the governments of terror sponsors. Most TFI products in the market today divest all stocks of public companies doing business not only in Iran and Sudan, but in Syria and North Korea as well — two countries also designated as state sponsors of terrorism and proliferators of nuclear weapons.
Terror-free products are fully divested from the start and include a range of active and passive investment options for sophisticated investors and retail offerings for individuals and families. This approach is more effective and is preferred by investment professionals charged with managing portfolios (leading to increased terror-free product availability and pressure on companies).
This approach will have a profound impact on the divest-terror movement for two major reasons:
First, prescreened terror-free products make terror divestment truly scalable, significantly increasingly the decibel level of the message to targeted companies.
Second, terror-free passive, index-based funds will exponentially increase the funds that can be invested terror-free due to the preference for passive products by many institutional investors. Should these institutions continue to support these products, the scope of terror-free investing will further amplify the divestment message. It can be expected that scores of companies, large and small, will join Total and others who wish to avoid the negative social and financial consequence of doing business with the enemy.
Another advantage to terror-free products is there is little if any statistical variance on returns. For example, one TFI product, UMB Asset Management’s active international fund, delivered an over-20 percent annual return for the last five years. That’s better than most non-screened investment products available in the market.
It all starts with the investor. Unless individuals and institutions demand and support terror-free products, the market will stall and an opportunity will be missed to put terrorism alongside the environment as issues that investors can change for the better.
A good way to start at the individual level is to support terror-free mutual funds and inform your fund providers that you will move your funds if they do not offer certified terror-free mutual funds.
If you sit on the board of a foundation or endowment, you can also recommend that the investment committee evaluate these terror-free products.
The U.S. capital markets have more than $25 trillion invested. If a mere 0.1 percent of that amount were invested in terror-free products, that would be $25 billion that companies that partner with state sponsors of terror would lose access to — a message that would not be lost on corporate executives.
Today, it is possible for all of us to contribute to winning the economic war on terror.
Roger W. Robinson Jr. is president and chief executive officer of Conflict Securities Advisory Group Inc., based in Washington, DC. A CSAG representative will speak at Financing of Iran’s Nuclear Proliferation and State-Sponsored Terrorism: How Sanctions and Divestment Make a Difference on Thursday, Sept. 11, at 7 p.m. at the Aidekman campus in Whippany (see Local officials ratchet up campaign against Iran).
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