Foreign direct investment – the acquisition of ownership in a foreign enterprise – is the dominant avenue for resources flowing into developing economies. In 2006, the total world FDI reached its second-highest level ever, $1.2 trillion – of which, $400 billion went to developing economies, according to the United Nations Commission on Trade and Development.

In that same year, official development assistance was $102.3 billion, according to the Organization for Economic Cooperation and Development – a 4.5 percent drop from the year before.

Back in 2002, UNCTAD estimated that the foreign investments of 64,000 corporations supported 53 million jobs worldwide. These multinational corporation investments surged in the 1970s after the global financial system’s liberalization.

FDI is certainly no panacea for poverty, but at the very least, it is any solution’s best foundation. Poverty is a many-headed demon; FDI is but a single, powerful sword.

In the hands of the right people, that sword could do a lot of good.

FDI has unwittingly given people who care a means to act on their hope for a better world. Corporations by themselves are dedicated to maximizing profit, but littered among the owners of corporations are hordes of caring people.

Half of all Americans own stock, directly or indirectly through mutual funds, hedge funds, money market accounts or group retirement plans. What they hold in their hands is the sword of FDI, with the potential to strike back against all they wish to change in the world simply by expressing demand for socially responsible behavior from corporate holdings.

From 1995 to 2003, socially responsible investment assets grew 40 percent faster than all professionally managed assets in the United States, according to Calvert Group, Ltd., which manages over $15 billion in assets. Shareholder activism has blossomed around the proven success of socially responsible investment.

Villanova is a shareholder activist.

Since 1989, Villanova University has, as part of its Investment Policy, pledged to avoid investing in any enterprise that significantly supports or might reasonably appear to support policies of grave social or economic injustice.

Villanova’s shareholder activism gained more substance with the recent adoption of the U.S. Conference of Catholic Bishops’ Guidelines on Socially Responsible Investment and the Resolution to Consider Divestment from Darfur.

Although Villanova does not select its own holdings, it can and does apply pressure to its investment managers and keeps them nformed of Villanova’s own core values and principles. Just being part of the movement can make a real difference.

In 1997, the slightest touch of shareholder activism brought the Sudanese government into line with America’s counter-terrorism program in the region. Today, boosted by oil discovered in 1999, the Sudanese government is far more stubborn.

Shareholder activism begins with actively engaging companies doing business with the targeted government. The goal is not to force companies out of the country, where they may be providing vital goods, services or jobs to the already-suffering Sudanese people; the goal is to cease dealings directly with the Sudanese government.

Not only does this initial strategy isolate the government, but it also takes away vital revenue streams that typically find their way into the military, rather than funding economic development. The Sudan Divestment Task Force estimates that the Sudanese government spends 70-80 percent of oil revenues alone on the military.

Even in non-crisis regions, socially responsible corporations can have a knock-on effect, positively influencing the governments with which they work. Government transparency has long been lacking across the developing world. Corruption pilfers more than current needs; it also discourages innovation and therefore long-term economic growth.

It is impossible to blame only government officials for being corrupt, when the corporations around them are just as devious. Take a look at the U.S. government.

Encouraging responsible corporate behavior is a vital way to encourage transparent government everywhere. Not every corporation will be receptive, but one should not assume one way or another. It is every caring investor’s responsibility to ask.

If the answer is consistently no, the final option is divestment. Sometimes the best way to wield the sword of FDI, is not to wield it at all.

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Oscar Abello is a senior economics major from Philadelphia, Pa. He can be reached at [email protected].