PetroChina Coalition Urges American Shareholders to Divest — and to Expand Political Risk’ Assessments

(Washington, D.C.): A large coalition of non-governmental groups (NGOs) from across the political spectrum chose Pearl Harbor Day to call attention, in a unprecedented fashion, to a rapidly emerging, 21st century national security and human rights threat: The malevolent and otherwise unacceptable activities of a subsidiary of China’s largest state-owned enterprise, China National Petroleum Company — PetroChina.

This ad hoc group sent a package containing seven separate letters and submissions on behalf of some two dozen public policy groups and religious/civic leaders to a number of decision- makers of more than forty American institutional shareholders of PetroChina stock. In a joint cover letter, they described themselves as a “coalition of non-governmental groups who are opposed to PetroChina’s activities.” It went on to state that “Our respective advocacies cover a range of issues that also bear on PetroChina’s shareholder performance, including national security, human rights, religious freedom, environmental protection, small business, labor rights and Tibet. Together our combined membership and outreach extends to millions of Americans.”

Among the groups included in the PetroChina Coalition are the International Campaign for Tibet (which took the lead in coordinating this historic effort), the AFL-CIO, the Center for Religious Freedom, Freedom House, Friends of the Earth, American Antislavery Group, Institute of Religion and Democracy, U.S. Business and Industrial Council and the William J. Casey Institute. Recipients of the Coalition package of letters and attachments included the CEO’s of Citigroup, Merill Lynch, Mellon Bank, Templeton Funds and Putnam Funds. These and other U.S. institutional recipients currently hold tens of millions of shares of PetroChina in portfolio. Letters were also sent by some members of the Coalition to the core group of investment banks which underwrote the PetroChina initial public offering to alert them — yet again — to the aforementioned issues.

This initiative represents a potentially momentous new milestone in market activism by the non-governmental community. Although “social investing” — notably in response to environmental, gun-related and alcohol and tobacco concerns — has figured in the markets for some time, national security, human rights and religious freedom abuses are recent additions to the world of fund managers. Indeed, the Casey Institute has yet to find a single U.S. investment bank, public pension fund, mutual fund or insurance company which includes a national security-related review in its “due diligence” assessments of emerging market entities. For its part, the Securities and Exchange Commission has yet to demand adequate disclosure with respect to where foreign firms seeking to raise funds in the U.S. capital markets — to say nothing of their parent companies, subsidiaries or affiliates — do business in the world and with whom.

As the campaign to strengthen disclosure and transparency requirements for American underwriters and investors in emerging market equity and bond offerings gathers steam — and, it is to be hoped, succeeds in heading-off the wrong sorts of foreign enterprises seeking to penetrate the American capital markets — the PetroChina Coalition’s latest, targeted and market-oriented approach to shareholders should be viewed as a harbinger of things to come. This point is elaborated upon in the letter included in the package from the Chairman of the Center for Security Policy’s William J. Casey Institute, Roger W. Robinson Jr., excerpts of which are attached.