Beverly Hills is a long way from the Sultanate of Brunei, but their connection is in the news this month thanks to a Beverly Hills Hotel boycott by Richard Branson and Virgin Atlantic, DreamWorks Animation (NASDAQ: DWA ) CEO Jeffrey Katzenberg, and other celebrities and travel groups.
The hotel is part of the London-based Dorchester Collection of luxe properties, and Dorchester is owned by Brunei Investment Agency, a state-run sovereign wealth fund. As Brunei implements violent new anti-gay and anti-adultery laws at home that call for stonings and floggings, protests are growing abroad.
A big-name boycott of Brunei's discriminatory laws
Celebrities Jay Leno and Ellen DeGeneres are part of the boycott, but it's not just Hollywood creatives who are protesting Brunei's politics. In the U.K., actor-author Stephen Fry is boycotting Dorchester properties in London, and fashion designers are calling for their industry peers to shun Dorchester hotels in Milan and Paris during industry events later this year.
Top U.K. cruise-travel agency Cruise.Co.UK is also boycotting Dorchester properties and suggesting other upscale hotels to its clientele. Travelers are receptive to alternatives, according to specialist cruise consultant Molly McIntyre, who recently redirected clients to the Crowne Plaza Beverly Hills, owned by InterContinental Hotels Group (NYSE: IHG ) .
Cruise.Co has not yet released figures on how many of its bookings have been affected. In Beverly Hills, the hotel lost more than $1.5 million in cancellations of conferences and charity events last week. That amount probably doesn't matter much to oil-wealthy Sultan Hassanal Bolkiah, whose personal net worth is estimated at $20 billion.
But the bad publicity sparked by the boycott brought Dorchester CEO Christopher Cowdray from London to Los Angeles to speak to the press about feeling "unfairly picked on." He later released a statement pointing out that lots of European companies receive foreign funding, "including sovereign wealth funds" like BIA.
Cowdray's feelings of unfair treatment hardly compare to the stonings, floggings, and limb amputations faced by gays and women in Brunei -- or to the financial tough times that could lie ahead for hourly workers at the boycotted hotels. But he did raise a valid point: There's a lot of investment money in the West tied to regimes with poor human rights policies, and tracking those funds can be difficult or impossible.
Hit-or-miss information on Brunei's holdings
The BIA holds assets of about $40 billion, according to the Sovereign Wealth Fund Institute, a global research and consulting group. But while the BIA doesn't publicly disclose its holdings, Dubai-based Fajr Capital, which funds energy and infrastructure projects throughout the Middle East and North Africa, lists BIA and Brunei's government among its shareholders.
Through Fajr, BIA is an investor in U.K.-based Tamar Energy. Tamar launched in 2012 in conjunction with supermarket enterprise Sainsbury Plc (LSE: SBRY ) , RIT Capital Partners (LSE: RCP.L), and the Duchy of Cornwall. The company operates renewable-energy sites throughout England to convert organic waste into biogas and eco-friendly fertilizer. So far, there have been no reports of protests related to Brunei's investment in Tamar Energy or any other businesses. BIA doubtless invests in other projects in the West, but investors and consumers won't find that information easily.
Sovereign wealth funds control $6.3 trillion in assets
SWFs are mostly funded by oil, gas, and mineral resources on behalf of national and state governments. They come in a lot of flavors, from Texas' Permanent University Fund to the New Zealand Superannuation Fund, with varying levels of assets and transparency.
The SWFI's interactive map shows the location and relative size of SWFs around the world, from Brunei to Norway to Alaska. All told, SWFs have more than $6.3 trillion in assets under management, from Norway's $838 billion in oil money down to the $70 million Ghana Petroleum Funds. BIA's $40 billion puts it in the middle of the pack, with more SWF assets than Texas and Azerbaijan, and fewer than Malaysia and Alaska.
But money isn't the only way to rate SWF's. The SWFI's Linaburg-Maduell Transparency Index factors in everything from fund ownership to independent audits and ethical standards. Norway, Alaska, and several other funds score 10 out of 10 on the index. Brunei earns a rock-bottom 1 rating, along with Algeria and Libya.
Inconsistent information for consumers, investors, and governments
Brunei's politics have created an untenable situation for many people who know they're doing business with BIA. Well-heeled travelers and event planners don't want their money supporting Brunei's repressive leadership. The Beverly Hills City Council passed a resolution Tuesday calling for BIA to sell the Beverly Hills Hotel, but odds are that won't happen. And there's not much that the city, the state, or the U.S. government can do about it.
In fact, it's not even clear how much SWF money is invested in the U.S. A 2009 Government Accounting Office report found that countries with SWFs make up a "substantial" share of foreign investment here, but "the extent of SWF investment within the United States' data on overall foreign official holdings cannot be identified." That's not helpful for investors and consumers who want to be socially responsible with their investments and spending.
A lack of transparency hinders investor and consumer activism
It's unclear how much the boycott by Virgin employees, travel agencies, fashion designers, and celebrities will affect politics within Brunei. The Dorchester Collection is most likely a small part of BIA's large portfolio. And as long as BIA and other sovereign wealth funds aren't required to publicly disclose their investments, consumers and investors won't have all the information they need to vote with their dollars.
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