On Wednesday 1 July 2015, the Church Commissioners announced that they have divested a £1.6 million holding in SOCO International, an oil and gas exploration company headquartered in London. Both the Commissioners and Pensions Board have also placed the Company on the National Investing Bodies (NIBs) restricted list.
So why have we divested? Divestment is the last resort. The NIBs have only divested twice before, after intensive engagement, from individual companies in the past five years where specific concerns have been raised about a company's behaviour.
Before arriving at a divestment decision a rigorous and intensive engagement process is conducted with the company. In SOCO's case the Ethical Investment Advisory Group (EIAG) undertook this on behalf of the Commissioners and Pensions Board.
This was initially instigated at the end of 2013 and was intensified in December 2014. The engagement followed a series of allegations of bribery, corruption and human rights abuse related to the activities of the company in and around Virunga National Park, a United Nations World Heritage Site in the Democratic Republic of Congo (DRC).
The Park is a UNESCO listed World Heritage Site and is the oldest national park in Africa.
Serious allegations were made by a number of international and national non-governmental organisations (including Human Rights Watch, Global Witness and WWF).
In its engagement the EIAG has continually outlined four specific areas of concern for the company to respond to:
i) Independent Enquiry
Instigation of a wide ranging and transparent independent enquiry of SOCO's operations in and around Virunga National Park (specifically addressing the allegations of corruption, bribery and human rights abuses), including the publication of the enquiry scope, outcome and confirmation of any resulting actions.
ii) Park Boundaries
Amendment of the previously issued statement agreed between SOCO and WWF to remove any room for doubt about SOCO's intentions within existing or future boundaries of a World Heritage site so that there are, without exception, no circumstances in which SOCO would conduct further exploration or production activities in the Virunga National Park or any other World Heritage site.
iii) Best Practice Standards
The adoption of best practice environmental and social standards. We remain concerned that the company's management policies still do not include a commitment to comply with the UN Guiding Principles on Human Rights and that the company is not a participant in the Voluntary Principles for Security and Human Rights.
iv) Corporate Governance
A commitment to address concerns relating to the company's corporate governance, including but not limited to the independence of the chairman.
These concerns were clearly and repeatedly relayed to the company during various meetings with board representatives and most recently at the AGM, during which a call was made for the Board to consider the position of the Chairman.
Fundamentally, the four areas were proxies for an overall judgement about the sincerity of the company in responding to shareholders legitimate concerns. It was clear that under SOCO's current leadership the company has not taken the necessary steps that would justify continued engagement and it was therefore assessed that continued investment in SOCO would be inconsistent with the NIBs Statement of Ethical Investment Policy. The Church Commissioners responded promptly to the recommendation of the EIAG and divested its holding immediately.
We like to work in partnership with companies and walk with them to address shareholders concerns. In this case we have called time on engagement as the company has not responded to our concerns and left us no choice but to divest in full.