Dialogue has limited power for Ethical Council

The Ethical Council, a collaboration between the Swedish funds AP1-4, concluded dialogues with four companies in 2009 after achieving its ethical objectives, but unsuccessful dialogue with Elbit Systems has resulted in the funds excluding the company from their portfolios effective immediately.

The Ethical Council uses dialogue and cooperation as its main tools for influencing companies to act responsibly with the aim of encouraging companies to address violations of international conventions and to implement proper systems to prevent future abuses.

In 2009 it concluded dialogues with Grupo Ferrovial, PetroChina, Thales and Yahoo after discussions that lasted for a couple of years and resulted in satisfactory improvements.

However The Ethical Council recommended that Elbit Systems be excluded from each of the funds’ portfolio because the company can be linked to violations of fundamental conventions and norms through its active development, delivery and maintenance of a custom-made monitoring system for certain parts of the separation barrier being built on the West Bank.

The Council has noted that both the European Union and the Swedish government consider the part of the separation barrier being built on West Bank to be illegal under international law.

Chair Annika Andersson said the work of the Ethical Council is based on a rigorous process where dialogues with companies were the main tool.

“Staying on as a shareholder to continue the dialogue produces visible results, but it also requires resources and patience. As a last resort, the Ethical Council may recommend each fund to exclude the company if the dialogue fails to produce the desired result. This is now the case with Elbit Systems Ltd,” she said.

The Ethical Council coordinates the work on environmental and ethical issues for AP1, AP2, AP3 and AP4 which have combined assets under management of SEK800 billion ($110 billion).

For The Ethical Council’s annual report click here