LP blacklists non-compliant PetroChina

Algemeen Burgerlijk Pensioenfonds (ABP) has said it will no longer invest in oil and gas producer and distributor PetroChina, one of its portfolio companies that has repeatedly ignored requests for greater compliance on social responsibility from the pension fund.

ABP has also withdrawn investment into US retail giant Wal-Mart Stores for similar reasons.

ABP invested €83 million ($106 million) into PetroChina, and tried several times during “a process of years” to persuade the company to do something about its business in Sudan, a country that violates human rights standards, according to a source close to the matter. PetroChina did not take the required action, which led to ABP withdrawing investment.

PetroChina did not respond to a request for comment.

Commenting on the action, Jos van Dijk at ABP told sister site PE Asia that “ABP expects all external managers, also the PE managers, to behave according to our responsible investment policy.” 

The Dutch fund, one of the largest in the Netherlands, has allocated 5.8 percent of its capital to private equity as of September 2011, according to van Dijk. This means private equity firms would be subject to blacklists due to non-compliance as well. 

Asia, which has some of the less developed countries in terms of responsible investment in private equity, may come under increasing scrutiny by LPs that are unhappy with the lack of compliance from some firms. 

One European infrastructure GP told PE Asia that investors are increasingly including responsible investment into their checklists when committing capital to firms. It is no longer an add-on for many funds, but an integral part of investing. 

GPs in the industry often cite varying levels of corruption as one of the issues when investing in certain Asian countries. With governments and now LPs heightening scrutiny on these issues, fund managers may have to watch even closer the way they handle responsible investment in order to attract capital from investors.