Africa Oil Corp.

Banks' funds invest in controversial oil company

6:55 min

Handelsbanken and Swedbank sells mutual funds that own shares in an oil company working in a war torn region of Ethiopia despite the banks' own ethical guidelines regarding human rights. 

The banks have holdings in Africa Oil Corp, which is part of the Swedish Lundin Group. The company prospects for oil and gas in the Ogaden region of Ethiopia, where two Swedish journalists were arrested in July as they were attempting to investigate oil activities in the region.

Handelsbanken and Swedbank say they support the UN Global Compact's ten principles for Corporate Social Responsibility (CSR).

But the Ethiopian government and military have been accused of carrying out widespread human rights abuses against civilians in the Ogaden region.

“The oil companies’ efforts to discover this oil and bring it to the world market has really intensified the conflict in many ways and put the oil companies in a bit of a conflicted situation," says Jonathan Ewing, a researcher at Swedwatch, a non-profit organization that reports on Swedish business relations in impoverished countries.

 “What they [the companies] have basically had to do is to ask for protection from an alleged human rights abuser and that is the Ethiopian government," says Ewing.

But Peter Schols, the head of Investment Management at Handelsbanken, says the bank is not prepared to sell its shares in Africa Oil Corp at this point.

”So far we haven’t seen or heard anything that puts us in a position that says this is not an investable company,” he says.

The Swedish government is currently trying to free two Swedish journalists who are serving an 11-year sentence for illegal entry into the Ogaden region of Ethiopia and for supporting terrorism.

Handelsbanken’s Nordic Small Cap Fund and Swedbank’s Africa Equity Sub Fund are the two funds that invest in Africa Oil.

By Gabriel Stein