Nordic investors increase demands on companies in Burma
In order to complement the new EU business sanctions towards Burma, GES Investment Services increases the pressure on companies operating there by initiating a new cooperation between investors. Companies exposed to the highest risks of becoming complicit in violations of human rights will be directly addressed by GES and clients like the Church of Sweden, Swedish insurance company Folksam and Norwegian life insurance company KLP.
Up till now, GES has engaged with investors in companies that have been officially associated to violations of human rights in Burma. But no precautionary engagement has been conducted in order to reduce the risks for companies of becoming involved in such violations. Consequently, GES and clients have identified a need for preventive action. Based on this an initiative for active ownership is taken and aimed at companies operating at high risk in Burma.
”Our clients are very concerned about the development in the country and naturally see a connection between the political risks and the financial. The EU’s new sanctions against trade in timber, metals and precious stones underline the complexity in high risk countries like Burma. But these sanctions only affect one percent of Burma’s trade with the EU. We have to continue to find new ways of handling the other 99 percent”, says Magnus Furugård, President and Managing Director of GES Investment Services, which provides advice to pension funds, banks and other investors managing assets totalling approximately 250 billion euro.
By high risk countries, GES refers to those encompassed by the OECD’s risk management tool for business in “weak governance zones”. Weak governance zones are defined as investment markets where governments are incapable of taking responsibility or unwilling to. These “failures by the government” lead to severe setbacks in political, financial and social institutions, which in turn breed long-time violence, crime and corruption and impede the economic and social development.
”From the view of the global society, it is positive that companies are present in high risk countries as they contribute with investments for welfare and know-how transfer from more developed societies to less developed ones. The transfer of know-how includes technology, economy, law, but also knowledge of the international norms in general and the human rights in particular”, says Magnus Furugård.
“But presence in high risk countries requires the companies to have a well-functioning Risk Management System with the aim to avoid becoming part of the regime’s oppression and thereby complicit in violations against environment and human rights as well as corruption”, says Magnus Furugård.
GES will now together with a number of major investors, for example the Church of Sweden, Folksam and KLP, engage in dialogue and other activities with the companies having the poorest level of preparedness in handling the risks in Burma.