Danish govt holds investors to ethics in bond investing after African corruption uproar

The Danish government and the nation’s financial industry have agreed to develop ethical guidelines for institutional investment in sovereign bonds. The move comes after DanWatch, a corporate ethics watchdog, disclosed that Danish institutions hold at least DKK2.7bn (€363m) in sovereign debt from African countries that are deemed corrupt and oppressive, sparking a public outcry. In a statement the Danish industry ministry listed several measures being undertaken as part of the agreement. They are:

• Danish institutional investors will adhere to the UN’s Principles for Responsible Investing (UN PRI);

• The investors will work with the UN PRI and the Danish Council for Social Responsibility to develop specific guidelines for sovereign bonds investing;

• The investors will disclose which countries they have bought sovereign bonds from and avoid countries which face UN sanctions.

Danish Industry minister, Ole Sohn, said “There is an agreement, that Danish investors should inform openly about their policy and practice regarding investments in state bonds. It is also important, that we have international rules on the area. That’s why I am pleased, that Danish investors actively will participate in the ongoing international work with the UNPRI about investments in state bonds. Finally I will ask thecouncil for social responsibility to create guidelines for responsible investmens including the considerations to bring in when investing in state bonds.” In its first report, DanWatch said Danish pension funds held DKK600m (€80m) worth of debt in sub-Saharan countries like Angola, DR Congo, Republic of the Congo, Senegal, Ivory Coast, Gabon, Nigeria and Uganda. A second report revealed that Danish investment funds and banks had bought at least DKK2.1bn worth of bonds from the same African countries. DanWatch said: “These African countries rank at the bottom of Transparency International’s Corruption Perceptions Index with scores between 2.0 and 3.0. At the top of the index is Denmark with a score of 9.4 and New Zealand with 9.5”. It added that according to NGO, Freedom House’s Index of Freedom, Angola, DR Congo, Ivory Coast, Republic of the Congo and Gabon, did not rank as “free countries.” This means that basic political rights are absent and basic civil liberties denied. DanWatch added: “These are often regarded as high-yield countries because investments are associated with higher risks than investments in more stable countries. On the other hand, the returns are also higher, which is used in their marketing.” Danish industry spokesman Henrik Røjgaard said that unlike with companies that issue stock, governments anywhere in the world were not obligated to tell investors how the money they took in was used: “You don’t know how the money is spent and you cannot exercise any influence over that. You either buy the debt from the country or you don’t. With this initiative we are trying to address this problem.”