By Craig R. Smith
Swiss America CEO
May 13, 2008
The handwriting is on the wall. If your money is invested in stocks or mutual funds linked with doing business in terror-sponsoring states, expect the worst. Smart money is noticing huge public support for cutting off terrorist funding. And money, as they say, follows smart ideas.
Recent headlines summarize the growing trend toward de-funding terror:
"Just about everyone with a 401(k) pension plan or mutual fund has money invested in companies that are doing business in so-called rogue states," reported CBS 60 MINUTES.
"General Electric is the largest profit-maker of doing business with terror states" ...
"Coca-Cola markets its products in both Iran and Sudan, skirting U.S. sanctions policies" ...
"Ford does business in Syria through a distributor and also has foreign subsidiaries such as Land Rover and Volvo that do business in both Iran and Syria"...
"GE CEO Immelt can say, 'We don't do business with them,' because they use foreign subsidiaries in France and Canada in this little shell game," reports BILL OREILLY at FOX.
"American victims of terrorist attacks in Israel have filed a lawsuit seeking more than $500 million from UBS AG, saying the Swiss bank made it possible for Iran to fund the terrorists,” reports FOX NEWS
Terror-Free investing is motivated by two primary concepts;
1) Many investors view corporate ties to U.S.-designated terrorist-sponsoring states as inconsistent with their personal values and views on terrorism; and
2) Many investors acknowledge the global security risk companies with ties to these countries are exposed to that can negatively impact share value and corporate reputation. Although less attention is applied to this latter consideration, it is a key reinforcing concept for why investing Terror-Free can, in addition to being a responsible values-based decision, be a smart financial decision as well.
In May 2001, the U.S. Securities and Exchange Commission (SEC) stated corporate ties to U.S.-sanctioned states can carry financial risk that is material to investors, even when such ties are minimal. In 2004, the SEC increased its attention to this burgeoning category of risk with the creation of the Office of Global Security Risk specifically mandated to ensure any company listing on U.S. exchanges with ties to U.S.-sanctioned countries disclose such ties in its public reports to investors. SEC Chairman Christopher Cox has addressed this specific disclosure requirement, stating, "No investor should ever have to wonder whether his or her investments or retirement savings are indirectly subsidizing a terrorist haven or genocidal state."
Financial damage follows reputational damage
Over the years there have been a number of examples of companies facing reputational damage and downward pressure on share value stemming from ties to these countries; the terrorist-sponsoring states primary among them. This has justified the actions of the SEC and the financial relevance of those who seek to avoid investments in companies with ties to Iran, North Korea, Sudan and Syria. Talisman has since pulled out of Sudan but while operational in that country, the company experienced a reported stock discount of as much as 25%. Statoil and UBS both faced reputational damage, and, by some accounts hits to share value, stemming from scandals regarding activities in Iran. UBS has since withdrawn its activity in Iran and other sanctioned states.
Most mutual funds with international exposure are invested in companies with ties to terrorist-sponsoring states and are unaware of these holdings and the risk they may carry. This risk can be accentuated by government fines, divestment campaigns, negative press, legal violations and even military action; these events can harm stock performance and harm portfolio value. By investing in funds that are not certified Terror-Free, investors are exposing themselves to a category of international risk that, in most instances, is completely unaccounted for.
Find out today if your money is supporting stocks or mutual funds are still doing business with the enemy at www.terrorfreecalculator.com.
RULES OF DISENGAGEMENT -TIME (5-1-08)
HISTORY OF TERROR-FREE INVESTING -CSAG
IRAN, GENERAL ELECTRIC AND THE NEW YORK TIMES -FOX (4-15-08)
SEC TERROR-TIES TOOL UNDER ATTACK -AP (1-18-08)
TRADING OUTCRY INTENSIFIES -WSJ (3-27-07)
THE NEXT STEP IN ’SOCIALLY RESPONSIBLE INVESTING’ -SATC (4-29-08)