SCANDINAVIA - Constructive dialogue by the Ethical Council of the Swedish AP-Funds has resulted in the service company Sodexo adopting a company-wide human rights policy, and has in turn led to it being re-instated as an investment option for the Norwegian life insurer Kommunal Landspensjonskasse (KLP).

The Ethical Council, which was formed by the first, second, third and fourth Swedish pension buffer funds (AP1-4), highlighted in May 2007 "systematic human rights abuses" at Harmondsworth Immigration Removal Centre in London, which is managed by Kalyx, a subsidiary of Sodexo.

In it's first annual report, published in April 2008, the Ethical Council said it was currently in discussions with Sodexo, which employs 330,000 workers in 80 countries, in a bid to persuade the company to "formulate and implement a clear policy on human rights that addresses particularly sensitive issues such as deprivation of liberty".

The Ethical Council has now confirmed the company has addressed the issues relating to the UK detainee centre, and implemented a human rights policy in October 2008.

Carl Rosén, chairman of the Ethical Council, said: "Sodexo has shown a serious commitment to correcting these problems and our discussions with them have been constructive. In a short span of time, the company has both addressed conditions at the detainee centre and adopted a human rights policy that is now being implemented throughout the organization."

"This is proof that it is fully possible for us as shareholders to influence the companies we invest in to respect the conventions signed by the Swedish Government. It also underlines the soundness of the Ethical Council's decision to intensify the dialogue by visiting the companies for face-to-face discussions", he added.

Following activity by the Ethical Council and other shareholders, KLP, the Norwegian life insurer which supplies occupational pensions to the public sector, confirmed Sodexo was being reinstated into its investment universe as of December.

Jeanett Bergan, head of responsible investments at KLP Kapitalforvaltning - the insurer's investment management company - said: "The company has all along been very accommodating. It has been willing to improve the situation and has acted promptly. The company is now able to refer to a new policy for human rights and measures to integrate them into the organisation."

In addition, KLP has reinstated BHP Billiton following the firm's decision in 2003 to introduce individual work employment agreements that were mandatory at some facilities, which was "very controversial" in relation to the International Labour Organisation's (ILO) Convention on free negotiating rights.

However Bergan revealed: "BHP has now confirmed they no longer use individual employment agreements for the newly-employed and that the arrangement will be phased out so at the beginning of 2010, the new legislation will be followed."

Despite these successes, KLP admitted its recent biannual review of which companies to invest in, in relation to its ethical criteria, has led to the exclusion of four companies from December - China Mengniu, Rio Tinto, Textron and AES.

China Mengniu has been excluded after it poisoned milk powder for children with melamine, leading to four children dying and around 94,000 getting kidney stones and renal failure, and the company admitted some of its products were toxic.

Meanwhile, AES has been excluded for the alleged violation of the indigenous population of Panama's human rights, through the operation of a hydro-electric dam, and Textron has been removed as it develops, produces and markets cluster bombs and cluster bomb components that will be banned by the international convention against cluster bombs.

KLP has also excluded Rio Tinto on environmental grounds, over the running - with Freeport McMoRan - of the world's largest gold mine and second-largest copper mine in New Guinea in Indonesia, as "extremely large volumes" of waste from the mines are discharged into a natural estuary.

The Norwegian Government Pension Fund - Global excluded Rio Tinto in September for the same reason, following a recommendation from the Norwegian Council of Ethics, as it determined there were no indications the company's practises would be changed in the future. (See earlier IPE article: Norway excludes Rio Tinto over environmental damage)

If you have any comments you would like to add to this or any other story, contact Nyree Stewart on + 44 (0)20 7261 4618 or email nyree.stewart@ipe.com

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