The LIC-ITC case: Taking action for responsible investments

The move by two Tata trustees of filing a suit that Life Insurance Company (LIC) disinvest from ITC, a cigarette-manufacturing firm, can be seen as part of a larger global trend, where investors are being pushed to step out of activities that are seen as debilitating to either public health or the environment.

The largest such move has come in the name of climate change with non-governmental organisations (NGOs) demanding pension funds, sovereign funds and multilateral banks among others to disinvest from coal power projects in developing countries and elsewhere.

Bowing to such pressures, the Norwegian Government Pension Fund, one of the largest in the world, two years ago decided to stop funding coal stocks across the world. It withdrew investments from Coal India Limited, though Norway itself is one the top five exporters of crude oil and gas in the World. The oil and gas sector constitutes around 22 per cent of Norwegian gross domestic product (GDP) and 67 per cent of exports.

The UK-based Children’s Investment Fund, too, had disinvested from CIL in 2014.

In India also, activist groups have ramped up pressures demanding investors and shareholders block support for business ventures that they think would trample rights of communities or harm the environment. One such campaign that garnered global support was against the bauxite mining of Niyamgiri Hills in Odisha by Vedanta. Some of the prominent global civil society groups, such as Amnesty International and Survival International, protested at the Annual General Meetings of UK based Vedanta Resources, whose Indian subsidiary was on the verge of getting a mining contract to dig tribal lands for bauxite.

Similar pressures were built on Essar group when it tried to mine the Mahan coal block falling in one of India’s densest forest lands.

The Tata group itself has come under pressure from civil society groups for its Dhamra Port in Odisha, which they alleged would lead to destruction of the endangered Olive Ridley Turtle’s territory. But one of the oldest cases where an institution backed off from funding a project was perhaps the Narmada valley multipurpose hydro project. After continued protests by the Narmada Bachao Andolan, the World Bank finally withdrew its loan offer for the project.