Amati CEO: ‘I don’t want to make money out of other people’s blood’

Paul Jourdan explains the firm’s approach to human rights

Amati Global Investors CEO Dr Paul Jourdan


Natasha Turner

Whereas ESG issues are often up for debate, human rights are black and white, and companies in countries that don’t meet international standards should be disinvested from, according to Paul Jourdan, CEO of Amati Global Investors.

Jourdan co-founded Edinburgh-based Amati in 2010 following the management buyout of Noble Fund Managers from Noble Group at the start of that year. The small-cap investing specialist firm has five funds: an AIM VCT, an AIM IHT, a smaller companies, a strategic metals and a strategic innovation fund.

“One of the problems with ESG is there’s no consensus on anything, but there is a consensus about human rights, which stems from the foundational documents,” he said.

The documents Jourdan is referring to are the International Covenant on Civil and Political Rights and the International Covenant on Economic, Social and Cultural Rights, which together with the Universal Declaration, form the International Bill of Human Rights.

Amati has adopted the interpretation of Article 1b of the two covenants from charity Clean Trade, of which Jourdan is a director. This suggests that the “principle of mutual benefit” needs to be plausible in respect of investments in the extraction of natural resources.

For Amati this means that where the level of freedom in a country has fallen below a very low bar (a score of 15 on US NGO Freedom House, for example, which the firm also uses for insight and analysis), then this will preclude investment in natural resource projects there, as it becomes impossible to argue that any possible benefits to the people of the country are outweighed by the dis-benefits of strengthening an oppressive regime. This is specifically intended to tackle what is often call the natural resources curse.

“What happens [when you invest in these countries] is a huge dis-benefit because you simply empower a dictator more and more over time, that regime gets entrenched, it’s impossible to remove and it gets more and more powerful as they get wealthier,” Jourdan said.

Disinvestment in ESG is “generally very ineffective”, he added, but for human rights “you have to set some kind of goal and it needs to be a low bar”.

For example, one of the companies in the portfolio bought an asset in Southern Sudan recently – “unfortunately that was the trigger to sell it”, Jourdan remarked.

“And if there’s a company we invested in that’s benefiting from slave labour, we would sell it.”

The countries represented in Amati’s mining portfolio are thus subject to this scrutiny and ESG Clarity asked Jourdan how he felt about, for example, human rights concerns flagged by organisations such as Oxfam, Youth Verdict and others in Australia, where the fund is 23.4% invested?

“Of course they’ll be questions in Australia over indigenous populations, and how they get treated,” he said.

“And those are kind of human rights questions, but I don’t really have a way of dealing with those other than to look at it as a governance question.

“The human rights bar is set deliberately very low for divestment because this is not designed as an intervention that should come up very much. It’s designed for quite extreme circumstances. But on the other hand, blindness to it is massively disruptive.”

While climate change is an ESG issue where Jourdan sees divestment as ineffective, these ‘governance’ issues appear an exception to the rule.

“Supply chains… that’s another legitimate area for managers to interrogate,” Jourdan said, and regulation or legislation, such as Germany’s recent supply chain law and the EU’s Corporate Sustainability Due Diligence Directive, can be helpful.

Other ESG regulation can also be helpful, Jourdan commented, but only if applied to private markets at the same rate as public ones, which have the tendency to be “much less transparent”, otherwise the scales will be tipped in favour of private equity.

But when it comes to human rights it’s down to governments to move the dial and investors to draw their lines based on that.

Jourdan concluded: “Even if we were offered a very high return we choose not to because we just don’t feel we can justify it. I don’t want to make money out of other people’s blood, effectively.”

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