Photo: AFP/Jim WatsonState legislatures all across the country, including my home state of Texas, are considering bills that would force state-sponsored investment funds to divest from companies profiting from business with the genocidal regime in Darfur.

If successful, pension funds representing teachers, police, firefighters, and other government employees would have to dump billions of dollars in equity in the offending companies. Presumably, the tidal wave of supply in unwanted stock will force the companies to divest from Sudan, or at best, force the companies to in turn force the regime to change its ways.

On the face of it, the decision to divest seems to be a clear cut moral choice, but in practice, conflicts of interest coupled with questions about whether divestment works not only stalls the pending legislation, but is also overturning existing legislation.

On the conflict question, opposing forces claim that a law forcing divestment conflicts with existing laws requiring fund managers to act in the best interest of the shareholders. If the companies in question generate better than average returns, the thinking goes, then fund managers have neglected their fiduciary duty to seek out the best returns. The fund managers, who are opposed to the law, point out that the companies, most of whom are from the oil and oil services sector, have not only outperformed the rest of their portfolio, but also the benchmark indexes. This much is true. Socially responsible investors must always concede better returns when heavy smokestack industries are in favor.

The last few years have seen superior returns from oil companies. However, when those companies are out of favor, SRI portfolios perform better. SRI portfolios are more heavily weighted toward technology and healthcare stocks, so for the seven years prior to the recent run-up in oil prices, SRI-screened portfolios performed better.

Divestment proponents lost a key battle on the conflict front. On February 23, a federal judge overturned Illinois' law, which was generally regarded as the most progressive, but also the most restrictive. The judge said such a law violates the federal government's authority to set foreign policy. Less restrictive laws have passed judicial muster, though.

Whether divestment works, or not, is also in question. Proponents point to the institutional investor pressure placed on the Apartheid-era regime in South Africa as a key reason for that regime's fall. Opponents claim that the reasons behind Apartheid's fall are more complex, and also say that excess supply caused by dumping will just be scooped up at bargain prices by investors with less scruples.

I can neither give concrete evidence that divestment does or does not work. However, if you own shares in the offending companies, whether through your pension or directly, then you personally are profiting from genocide. So, to me, it does not matter if it works. I would want no part of it. Companies such as Oil and Natural Gas Co. of India, China Natural Petroleum Corp., and Schlumberger (NYSE:SLB) should pay the price of propping up murderers.

Mark Brandon is the owner of First Sustainable, a socially responsible investment advisory. His weekly column on SRI appears in Green Options on Mondays.