Governance

Swedish AP funds exclude Wal-Mart, Freeport McMoRan despite years of engagement

Chemicals producers Incitec Pivot and Potash Corp also to be divested.

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The Ethical Council which advises Sweden’s multi-billion-euro state AP funds has advised them to divest their holdings in US retail giant Wal-Mart and mining company Freeport McMoRan Copper & Gold Inc., despite engaging with the companies for years.

The funds exiting Wal-Mart are AP1, AP3 and AP4 (AP2 sold its stake in 2006). All four will sell their stakes in Freeport McMoRan, as well as chemicals producers Incitec Pivot and Potash Corp.

The council has failed to make headway with any of the companies on a range of issues and has decided to terminate its dialogue with them.
The Wal-Mart exclusion stems from its links with what is termed “systematic abuses of workers’ rights” and the denial of workers’ right to form and join trade unions.
The Ethical Council has engaged with Wal-Mart on the issue since it was formed in 2007, but it says it has been forced to conclude that “continued dialogue with Wal-Mart will be to no avail”.“The Ethical Council performed a detailed analysis of the four companies and concluded that AP1-AP4 should exclude them as investment vehicles from their portfolios,” said Christina Kusoffsky Hillesöy, Chairman of the Ethical Council.

Exclusion is seen as the “last resort” when engagement has failed and the Ethical Council admits it is a setback.
The exclusion of Freeport McMoRan Copper relates to its controversial Grasberg facility in Indonesia; the council said it has been told by the company that it reserves the right to release waste into rivers.
“The Ethical Council’s has therefore concluded that further dialogue is likely to be ineffectual and that there remains a continued risk of further treaty violations due to the company’s reluctance to exclude the possibility of deploying its controversial waste processing practices in future projects.”
The exclusions of Incitec Pivot and Potash are because they buy phosphate from a Moroccan supplier that mines its product in the disputed Western Sahara territory. Three years of dialogue with both has produced no results.