Fuel for Conflict

Saturday, April 1, 2017

Sweden - All companies have a responsibility to respect human rights in their business operations.

For investors, this responsibility extends to the operations of the companies
they invest in. This report examines how banks and pension funds respond to allegations
that a company in which they have invested millions of their customers’ money
has contributed to the killing and displacement of thousands of people.
Between 1997 and 2003, the Swedish oil company Lundin1 was prospecting for oil in
southern Sudan. At the time, Sudan was torn apart by the country’s second civil war,
an extremely brutal conflict with severe, lasting consequences for the civilian population.
During the course of this war, millions of people were killed and displaced in a
conflict where hunger, slavery and systematic rape were all employed as warfare tactics,
as were attacks on schools, churches, hospitals and aid organisations.
Control of the oil fields, and the revenues they generated, was perceived as essential
to the outcome of the war. Thus, when international companies decided to invest in
oil exploration, this drastically increased the strategic importance of the oil fields. As
the government fought to secure the income from the oil fields, the southern rebels
fought to deny their enemy this crucial advantage. To prevent disruption of the oil
extraction, the government began a military campaign to clear the concession areas
of civilians, which led to the death of thousands and the displacement of tens of thousands
from their homes.

Considerable information exists detailing the widespread and systematic human
rights violations that occurred during the conflict and the role that the oil companies
played. Lundin is no longer active in southern Sudan and in the twenty years that
have passed since the start of its operations, Lundin has never acknowledged that the
company in any way contributed to adverse impacts on human rights. Instead, the
company claims that it was a force for peace.
Today the seven biggest banks in Sweden and the Swedish government pension funds
own Lundin shares worth 3.6 billion SEK (over 410 million USD). Most were invested
at the time of the activities in Sudan and all but one have since been listed among
Lundin’s biggest shareholders.

Despite there being substantial information on how the oil industry is linked to
human rights violations in Sudan, investors surveyed in this report claim that the evidence
is insufficient. This has raised questions about how investors assess the impact
of their business activities on human rights in the countries where their investments
are held. When a shareholder proposal to initiate an independent investigation into
the matter was presented at Lundin’s annual general meeting in 2012, only two of the
shareholders surveyed in this report supported the proposal. Since the proposal did
not gather enough votes, no investigation was initiated.

Investors state that they have acted on the allegations made against Lundin through
dialogue with the company. However, in some cases, this dialogue has been ongoing
for more than ten years without producing any concrete results. Despite the severity
of the accusations over the past decade, some investors only initiated direct dialogue
with Lundin in 2012.
The Lundin CEO and the chairman of the board are currently suspected of being
complicit in serious violations of international humanitarian law in Sudan in the
period covered by this report.2 Although no charges have been brought, many of the
investors state that they are awaiting the results of the criminal investigation before
acting. However, a company’s responsibility to respect human rights is a separate
issue to the criminal liability of these two individuals. An investor that wants to
honour this responsibility and act in accordance with international frameworks such
as the United Nations Guiding Principles on Business and Human Rights (UNGPs)
must conduct proper human rights due diligence to identify the adverse human rights
impacts regarding their investments and act on these findings.



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