June 29 (Bloomberg) -- Harvard University, the world's richest school, can own shares of Asian oil companies tied to war-ridden Sudan if it holds them in accounts, such as mutual funds, that the institution doesn't control directly, a governing committee said.

Harvard's Corporation Committee on Shareholder Responsibility also voted to prohibit direct ownership of stock in Oil & Natural Gas Corp., an Indian company involved in a joint venture with a Sudanese-government firm. The Cambridge, Massachusetts, university, with an endowment valued at $29.2 billion a year ago, made the announcement in a statement today.

Harvard previously halted direct ownership in two Chinese oil firms because of their ties to Sudan's government. Under pressure from students, the university in February began examining indirect investments made through exchange-traded funds. A four-year conflict in the Darfur region has killed more than 200,000 people and forced 2 million from their homes.

The committee ``has concluded that no change in the university's divestment policy with respect to indirect investment is called for,'' according to the statement.

Fifty-four schools, including the University of California and Stanford and Yale universities, have dropped holdings in companies doing business in Sudan, according to the Washington- based Sudan Divestment Task Force, a group promoting Sudan- related divestment. Eighteen states and eight cities also have divested holdings, the group said.

Mutual Funds

The Harvard policy applies primarily to mutual funds, index funds and exchange-traded funds where Harvard doesn't have direct control, the committee said. Money invested by Harvard Management Co., a university-affiliated firm, and by most outside managers whom the school hires, still can't be directly invested in three prohibited companies, the statement said.

``It's morally inconsistent to only sell off these direct holdings when there are these indirect holdings that it can easily get rid of,'' said Trevor Bakker, a 19-year-old sophomore at the school who is a member of the advocacy organization Harvard Darfur Action Group. ``We believe there are alternatives.''

Harvard in 2005 ordered the sale of PetroChina Co. shares, saying revenue from the firm's partnership with Sudan's government helped finance violence in Darfur, and in 2006 divested from Sinopec, also called China Petroleum & Chemical Corp.

``If it was appropriate to divest the securities of those companies previously, it is no less so now,'' the governing committee said in the statement today. The U.S. Congress and State Department have labeled the Sudan attacks ``genocide.''

Warren Buffett

Shareholders in Warren Buffett's Berkshire Hathaway Inc., based in Omaha, Nebraska, rejected a proposal in May to sell the insurance company's $3.3 billion stake in PetroChina. Boston- based Fidelity Investments, the biggest U.S. mutual fund company and the target of a campaign on Sudan-linked stock, cut its PetroChina holdings this year.

Harvard owns about $15.5 million in shares of the Chinese companies in exchange-traded funds run by Barclays Global Investors, the San Francisco-based unit of Barclays Plc, and PowerShares Capital Management, a subsidiary of Invesco Plc, according to filings with the Securities and Exchange Commission.

After a campus petition drive early this year attracted 1,400 signatures, the university assigned a 12-member advisory committee of faculty, students and alumni to examine Sudan-linked investments. The advisory group concluded that the exchange- traded funds gave Harvard access to markets that might otherwise be out of reach and help it manage investment risk, according to today's statement.

`Essential Functions'

The advisers examined the ethics of investing indirectly in companies linked to Sudan, ``while recognizing `the university's essential functions -- the provision of knowledge, the opportunities for scholarships, the hiring of the best professors -- also have profound ethical content,' '' the committee said, quoting from the advisory report.

The advisers' recommendations were accepted by a subgroup of the seven-member governing board of university. Harvard will now also tell outside managers of its divestment policies and ask them to consider that when making direct investments, the panel said.

The corporation committee added Oil & Natural Gas, India's largest oil explorer, to its list of banned companies for direct investment.

Sudapet

The company, 90 percent owned by the Indian government, holds a 25 percent stake in the Greater Nile Petroleum Operating Co. PetroChina's corporate parent and Sudapet, a Sudanese government company, are the other partners, the statement said.

Harvard doesn't have any direct holding in Oil & Natural Gas, the governing committee said in the statement.

``It's highly dissatisfying that that's the one concession that they're willing to make when there is so much overwhelming support to get out,'' said Bakker, of the Harvard Action Group.

The group earlier this year urged Harvard to broaden the list of companies it divests. The corporation panel said Harvard should stick to ``its narrowly tailored, case-by-case approach'' of banning companies that are direct equity partners of Sudapet, according to the statement.

To contact the reporter on this story: Matthew Keenan in Boston at mkeenan6@bloomberg.net.

Last Updated: June 29, 2007 17:38 EDT