Terror-free investing keeps money out of companies that do business with rogue states

Terror-free investing ke

October 27, 2009 00:47
4 minute read.

For Arizona-based money manager Mark Langerman, it all started with a client who had a conscience. Upon returning from a conference on divestment, the client informed Langerman he wanted to "put his money where his mouth was" and divest from companies that do business in countries that sponsor terrorism. As it turned out, Langerman had to dismantle - and then reassemble - the entire portfolio, but he realized his client was onto something. "Both personally and professionally I did a lot of soul-searching and realized this is something I need to do," Langerman said recently. Three years later, Langerman and Paul Seidman have launched Empowerment Financial Group to provide terror-free investment products. With a portfolio launched this past May, Langerman said investors could hold companies accountable for doing business in countries that sponsored terrorism. "The importance here is on a large scale: Our goal is to help limit access to the US capital market for these companies. It's an exclusionary model," Langerman said. "We have a virtual electric fence. Unless you pass the smell test, we won't participate in any of your securities offerings." For Langerman, the "economic war on terror" started with one client, but has since grown. Mobilizing investors, he recognized, "could be a very, very powerful thing." Langerman's goal is ultimately to have a mutual fund that is terror-free. Currently he has several million dollars in the portfolio, and every transaction is screened for involvement in terror-sponsoring nations. Once a quarter, the portfolio is certified terror-free by an independent research provider. As of now, there are 586 companies on his exclusion list. Langerman declined to discuss returns, but said, "We don't believe investors have to compromise return in order to invest based on their values." In fact, one of his clients cited "good business" as a main factor driving his own terror-free investment portfolio. "You can look at things from a religious standpoint, you can look at things from a moral standpoint, all of which are very important, but some people when they're investing will look at things from an economic standpoint," said the investor, a Michigan real estate developer. "It's the right economic thing to do." He added, "When you have choices, why not invest in something that is promoting a terror-free world, rather than invest in companies that are investing [in] or do business with countries or others that are invested in state-sponsored terrorism?" Terror-free investing got its start in the wake of 9/11, when the US Securities and Exchange Commission identified the risk associated with doing business in a state that sponsors terrorism. The SEC's Global Security Risk office gave birth to the industry, which is growing, albeit at a slow pace. To date, a few private institutions offer terror-free sections, including Credit Suisse. Currently there also are 15 US states that do either terror-free or Iran-free investing, including Florida and Indiana, which passed a bill earlier this year to divest all of its pension systems away from companies doing business in terror-sponsoring nations such as Iran, Syria and Sudan. In Florida, the Jewish Community Relations Council has supported such measures by urging the community not to let anyone use their money to fund terrorism. After 9/11, Americans were asking themselves what they could do to fight terrorism, said Christopher Holton, who directs the Divest Terror Initiative at the Center for Security Policy in Washington. "One of the things we can all do is not invest in companies that provide corporate life support for our enemies," he went on, citing the effectiveness of divesting from South Africa during the apartheid years. "We think that there need to be comprehensive and effective economic sanctions against Iran. This is one way to help achieve that." United Against Nuclear Iran, co-founded last year by Dennis Ross and Richard Holbrooke and currently headed by Mark Wallace, is also working to raise awareness and put economic pressure on Iran. "The end goal is for Iran to give up its nuclear program," said Kimmie Lipscomb, UANI's communication director. "Terror-free is one way of doing that." The group's Iran Business Registry is a database of companies that have reportedly done business with the Islamic Republic. Updated daily, the clearinghouse currently includes 175 companies, 20 of which are American. Through the registry, UANI hopes companies will sign on to a declaration stating that they do not and will not do business with Iran. About a month ago, General Electric became the first company to do so. "Overall, our hope is that this sends a message to the Iranian regime and that it weighs into their cost-benefit analysis," Lipscomb said. "Are they more committed to developing illegal nuclear weapons and as a result being isolated economically by the international business community?" She said UANI had worked closely with Florida congressman Ron Klein, who introduced the Accountability for Business Choices in Iran Act. The act would prevent companies that do business with Iran from doing business with the US government in the form of contract work or bailout money. UANI can't quantify its work, Lipscomb said, but she cited an effective campaign to keep Iranian President Mahmoud Ahmadinejad away from event spaces and some hotels during the UN General Assembly session in New York last month. "He was effectively quarantined to the one venue that agreed to host him," she said. "He knows that. I don't think you can underestimate the power of getting in his head in that sense."

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