Frequently Asked Questions

What companies would I be avoiding if I invested Terror-Free?

The best way to answer this is with a question. What criteria governs your Terror-Free policy? If you're an individual investor that chooses a Terror-Free separately managed account or mutual fund, odds are the product will employ the increasingly standard national definition for Terror-Free: excluding companies with active or current ties to Iran, Syria, Sudan and/or North Korea that are non-humanitarian in nature. Many of these retail products also provide policy exemptions for firms with consumer goods ties to these countries.

Institutional investors vary in terms of their screening definition, but most institutional managers make use of this same standardized definition as the basis for their products. For example, Northern Trust is making available a commingled international equity investment strategy based on a Terror-Free index jointly offered by CSAG and FTSE. The index uses this same standard screening criteria, meaning any asset manager that offers a product based off the index has, by definition, brought to market a Terror-Free option for institutional investors. The FTSE-CSAG index screens out some 300 firms based on this criteria.

Are companies doing business in terrorist-sponsoring countries breaking the law?

The majority of publicly traded companies that do business in terrorist-sponsoring states have legal, commercial ties to these countries and are not known to be directly supporting terrorism. In fact, the U.S. government would not allow you to invest in any company that has a known, direct link to terrorism.

If these companies are not breaking the law or directly supporting terrorism, what is the purpose of a Terror-Free investing strategy?

Terror-Free investing is not a matter of legality. It is a question of whether an investor or pension system wants to invest in companies that do business with countries that sponsor terrorism.

In some cases, this is a values-based determination: the companies are engaged in activities that contravene the investor's personal values. For example, some investors choose to avoid investing in companies that promote tobacco, gambling or alcohol—not because it is illegal to invest in such companies—but because the investor is seeking to align their personal values with their investment decisions.

In other cases, investors choose to exclude such firms based on the risk these ties can pose to corporate reputation and share value—what is termed global security risk.

Whether a Terror-Free strategy is designed with values or risk mitigation in mind, the investor has every right to invest in these firms but is choosing not to do so for reasons that have nothing to do with the law.

Explain how Terror-Free investing could reflect one's views on terrorism and security.

For many investors, Terror-Free investing is a way to register their opposition to the sponsorship of terrorism or pursuit of weapons of mass destruction by Iran, Sudan, Syria, and North Korea. Some investors may also pursue a Terror-Free policy to register their opposition to the human rights violations that occur in these countries and, in the case of Sudan, the genocide of its people. As long as these countries continue such objectionable policies, some investors do not want to invest in companies that are viewed as providing direct benefit to those governments via their business activities.

Many view Terror-Free investing as a means of sending a collective message: "We do not approve of terrorism sponsorship, your countries pursuit of weapons of mass destruction and/or human rights violations and, therefore, we do not approve of your company's decision to do business with these countries."

I've heard the SEC is coming out with a list of companies with such ties.

Technically speaking, the SEC has had such a "list" for some time available via its Edgar online system. The issue for investors and companies that provide Terror-Free products to the markets is one of coverage. Of primary concern from an investor's standpoint is the fact that the SEC only has reporting jurisdiction over some public companies that do business in Iran, Syria, Sudan and/or North Korea. Were an investor to use an SEC list as a screen, it would likely miss hundreds of companies that have such ties due to the simple fact that the SEC cannot require disclosure from such foreign companies. For example, the first public SEC list excluded one of the most active European firms in Iran while including a U.S. firm that had an accidental, one-off money transfer to Iran in 2005. Is that how you want your Terror-Free screen to look?

A second issue with the SEC list is that the first version was black or white and made no distinctions based on the type of corporate involvement. Whereas most Terror-Free screens today focus on companies with active or current ties to these countries, the SEC's list draws no such distinction. Also, since the first version was designed as a disclosure tool and not a screen, it likewise made no distinction between Reuters, which reports from Iran and is considered in most Terror-Free screens to be exempted based on journalism or humanitarian ties and energy companies that have the type of business ties that merits exclusion in the eyes of most Terror-Free investors.

Finally, the question on the SEC is no different than the question on which data provider to use when investing Terror-Free. Looked at through that lens, the SEC "list" competes on some level with more comprehensive lists provided by independent research firms such as CSAG. When choosing a Terror-Free product, it is important to know whose data is underpinning the list, what methodology governs the research and analytic process and whether the provider has the issue expertise and research focus, coverage and experience to provide a world class product. We believe this is why most asset managers turn to CSAG when deciding to offer products Screened and Certified Terror-Free.

Should I invest Terror-Free?

If you do not want to invest in companies that do business in countries that sponsor terrorism, you no longer have to. Today, you have options. It is important, however, to discuss all investment options available with your investment advisor prior to choosing the strategy or product that is right for you.

I've decided I want to invest Terror-Free. What do I do now?

If you are an individual investor, please see Solutions for Individual Investors to learn about some of your options. Institutional investors or those associated with public pension systems, university endowments, religious organizations, private foundations and other such institutional investors can visit Solutions for Institutional Investors to learn about investment options and Terror-Free strategies currently available.

Have a question not listed here?

Send us the question and we'll post an answer.

Learn more about Terror-Free investing options for individual investors, institutional investors, asset managers, and mutual fund providers.