UN staff pension fund mired in 'dirty profits' from firms guilty of rights abuses
The United Nations is facing calls for a full review of its staff pension fund after the Guardian uncovered that it has around a billion dollars invested in companies whose activities are or have been incompatible with core UN principles and programmes.
Established in 1948 by the UN general assembly, the fund provides retirement, death and disability benefits to employees. At present it has 203,050 beneficiaries and a market value of $64bn (£45bn), of which nearly $1.5bn is invested in 24 publicly traded companies. Many of those companies have been or are being prosecuted for corrupt practices, implicated in human rights abuses or in environmental catastrophes.
“These investments clearly undermine the credibility of a well-respected organisation,” said Thomas Küchenmeister, managing director of Facing Finance. “How can I promote sustainable development and the protection of human rights and simultaneously benefit from violations of these?”
The fund’s largest investment is $210m (£150m) in Shell shares. A 2011 report by the UN environmentproject examining environmental damage from oil spills in Nigeria’s Ogoniland found Shell to be partially responsible, noting that Shell had failed to adhere to its own internal procedures, “creating public health and safety issues”, the restoration of which “could prove to be the world’s most wide-ranging and long term oil clean-up exercise ever undertaken”, with an estimated cost of $1bn.
Three years on from the study, Amnesty and other groups said little had been done to clean up the pollution, while further claims are ongoing over the continuing contamination caused by the spills. Shell insists it is following international best practice in its operations in Nigeria.
Barnaby Pace, from Global Witness’s oil, gas and mining team, told the Guardian that “as a global leader”, the UN must invest responsibly and “leverage its investment positions to demand that all companies it invests in … embed robust anti-corruption measures in practice”.
“This will help ensure UN investments are not wasted in companies that compete on bribery instead of quality and allow public money to line the pockets of kleptocratic elites,” said Pace.
Declining to comment on specific companies, the UN special rapporteur for human rights and the environment, John Knox, said: “The United Nations has moral and legal responsibilities to take the lead in promoting and protecting human rights, including the rights undermined by environmental degradation … and [should] seriously consider how to ensure that its investments are consistent with those responsibilities.”
The fund also holds a combined $244m in HSBC and Barclays. The pair have been pursued by authorities in recent years over allegations of handling covert financial transactions, and have paid hundreds of millions of dollars in fines or settlements, most recently Barclays in 2015, over failings in anti-money laundering processes.
HSBC was fined a record $1.9bn in 2012 for what US prosecutors described as wilfully flouting sanctions, allowing at least $881m in drug money to pass through its Mexican branches.
Also in 2012, the US Justice Department extracted $3bn from GlaxoSmithKline, in which the fund holds $78m of shares, after the pharmaceutical giant pleaded guilty to failing to report drug safety data, misbranding drugs, and marketing anti-depressants not approved for use by minors to children. The firm was fined $490m in China, where it was found guilty of bribing doctors and hospitals to push products.
Küchenmeister said there was some irony as the UN was a driving force behind the authoring of the “six principles for responsible investment” (PRI).
“With the investments in companies violating human rights, pollution, corruption, or international law the UN is violating its own principles of responsible investment,” Küchenmeister wrote in an email. “It is irresponsible and a no-go to generate pensions from dirty profits for UN people [working] their whole life [to counter] the harmful impacts of companies violating social and ecological standards.”
The PRI have at their heart environmental, social and corporate governance (ESG). Last year the UN staff pension fund was awarded an A+ PRI rating. However, an analysis of the fund’s top 10 biggest shareholdings by leading ESG ratings agency Sustainalytics categorised them as either of “significant controversy”, or “high controversy”.
The ratings reflect “impact on the environment and society”, as well as the degree to which they suffer from ESG issues.
Ian Richards is one of 11 staff representatives on the UN pension fund’s board. He told the Guardian that when the board met with the secretary general’s representative in charge of the fund’s investments in March, it voiced concerns about lack of oversight.
“Everything with the UN is quite complicated but that doesn’t prevent us having a closer look at this,” he said. “We don’t want to find that our pensions are being paid from companies that go against the values that we’ve been working for all our careers.”
A spokesperson for the UN secretary general, António Guterres,said that while the fund does not comment on specific investments, it “does not believe there is a conflict between its fiduciary obligation to its beneficiaries and core UN objectives”.
They added that the fund “addresses ESG concerns by explicitly prohibiting investments in the tobacco and armaments sectors”, and its policy is built around the belief that: “By deploying an active voting and engagement policy which supports NGO initiatives and communities, the fund can more effectively impact positive and sustainable change consistent with our mission.”
But Peter Frankental, director of Amnesty’s UK’s business and human rights programme, said there should be a full review.
“These revelations are troubling, because the UN cannot distance itself morally from the activities of its staff pension scheme to which it contributes financially, even if this is an independent body run at arm’s length,” he said, “The secretary general should install a council on ethics that decides on the exclusion of companies from investment which violate human rights and environmental norms and standards.”