American Funds’ approach to human rights issues
At various times, individuals and groups urge investment firms to divest their holdings in all companies doing business in countries whose governments are violating or threatening the human rights of their own or other countries’ residents. They do so in the belief that total divestment from a country is the best way to bring about needed change.
While some believe total divestment is necessary for change, others generally prefer that the world stay engaged with the offending countries or governments because engagement provides the best — or only — opportunity to exert influence. Moreover, many recognize that divestiture can sometimes be counterproductive, especially when it harms not just the current government but also the economy on which the victims of repression depend for their livelihoods.
Other individuals or groups focus their attention not on whole countries but on individual companies. Shareholders in several mutual fund organizations have considered (and rejected) proxy proposals sponsored by investors that ask fund boards to adopt policies preventing the funds from investing in any company that the board determines is substantially contributing to human rights violations.
Human rights issues are important and are among the factors that can affect companies’ long-term prospects for success. Any human rights issues that may affect companies are considered by our investment professionals as part of the investment management process. This approach is consistent with the stated investment objectives and policies of the funds. We believe considering these issues on a company-by-company basis and as part of the investment management process is preferable either to having the fund boards make these decisions or to dealing with divestiture at the level of the entire country.
We will continue to weigh the impact of these issues and monitor relevant developments as part of our ongoing management of the American Funds.