A Guide To The Public Pension Funds Divesting From Russia
Forbes, Liz Farmer, Senior Contributor
March 12, 2022
As economic sanctions against Russia for its invasion of Ukraine spread, state and local public pension plans are looking at selling off their Russian-related assets and some are already doing so.
Lawmakers in at least a dozen states are pressuring their pension funds to divest from Russian-related investments. Divestment isn’t likely to have much impact on the funds themselves as Russian-domiciled investments make up less than 1% of most (if not all) state portfolios. But collectively, it sends a message. For example, California’s CalPERS is the largest pension fund in the world and it alone holds nearly $1 billion in Russian assets.
However, it’s likely that at least some (if not all of) these funds will be selling at a loss. Here is a snapshot of what’s happening across the U.S.
The state legislature held a hearing on House Bill 396, which would require the Alaska Permanent Fund Corp. and state retirement portfolios to not invest further in Russia and to divest their current Russia holdings. The bill would affect about $333 million in assets, or less than 0.3% of total state investments. Gov. Mike Dunleavy is backing a more moderate version of divestment.
California Public Employees' Retirement System (CalPERS) and California State Teachers' Retirement System (CalSTRS) are the nation’s two largest pension funds and collectively hold about $1.5 billion in Russian-related assets, according to Reuters. A bill pending in the state legislature calls for both funds to divest from those holdings.
The Chicago Public School Teachers' Pension & Retirement Fund board has voted to divest from its $5 million in holdings in Russian-linked securities and passed a resolution to support the Ukrainian people. The fund holds $13.1 billion in total assets.
The Colorado’s Public Employees’ Retirement Association confirmed recently it will divest $7.2 million from a Russian bank. The majority of that — $7.2 million — is invested in the Russian state-owned bank Sberbank, which is a target of federal sanctions, reports the (sic).
State Treasurer Shawn Wooden has directed funds to sell Russian assets and in a statement referred to President Vladimir Putin as “a dangerous autocrat who needs to know that the free world stands in solidarity with the Ukrainian people.” State funds held $218 million worth of Russian-domiciled investments as of Feb. 24, according to Reuters.
Gov. Brian Kemp’s office has announce the state will fully divest from Russia. So far, that appears to only affect the Employees’ Retirement System of Georgia, which holds an exchange-traded fund that includes a variety of Russian companies. The fund, iShares MSCI Russia ETF, has lost more than 80% of its value since the beginning of the year.
The Kansas Public Employee Retirement System is considering whether to divest from some or all of its nearly $36 million invested in Russian assets, according to the Topeka Capital-Journal. A spokesperson for KPERS said the investment in Russian securities, which totals $35.9 million, accounts for 0.14% of the portfolio's $25.2 billion in assets.
The Kentucky Teachers Retirement System said it sold its $15 million invested in Sberbank on Feb. 23, the day before Russsia invaded Ukraine. The fund sold at a loss of $3 million but did so because of expected financial sanctions that would further devalue the asset. The news of the sale came in response to false reports that TRS was a top shareholder in the bank.
“It’s almost a ridiculous thought that $15 million would represent a number-two shareholder position in Sberbank,” spokesperson Beau Barnes told a legislative committee this week.
Minnesota lawmakers announced a plan this week to divest the state's pension funds from Russia. According to the Associated Press, the legislation would require the state's pensions funds to divest from Russian assets, which were estimated to be worth around $53 million before Russia's invasion of Ukraine. It would also codify an executive order from Gov. Tim Walz that prohibits state agencies from doing business with Russian companies.
The Michigan Investment Board voted unanimously this week to divest the State of Michigan Retirement Systems from any institutions based in Russia or Belarus, reports mlive.com. The move doesn’t have much significance—only .06% of $98 billion in state pension assets are associated with Russian institutions and organizations and there are currently no Belarusian holdings in the state portfolio, according to the state treasury department.
Gov. Phil Murphy is expected to sign a bill that would prevent the New Jersey Pension Fund from investing in any company "owned or controlled by the government of Russia or Belarus, or an instrumentality of the government of Russia or Belarus, or is engaged in business in or with either of those governments or its instrumentalities," according to the bill text. The legislation would also prohibit state and local governments from having other business or banking ties with Russia, Belarus or companies affiliated with their respective governments.
New York Gov. Kathy Hochul issued an executive order late last week telling state agencies to divest from Russian-related assets and so far, the $152.4 billion state Teachers’ Retirement Fund has announced plans to sell its $125 million in Russian-related assets. The New York State Common Retirement Fund is currently undergoing a review of its Russian assets.
The New York City Teachers’ Retirement System announced plans this week to divest from Russian holdings, about $90 million in securities out of $104 billion in total assets.
The North Carolina House, at the urging of state Treasurer Dale Folwell, has passed a resolution asking Congress to alter the Foreign Sovereign Immunities Act of 1976 to give state pension funds and other institutional investors more effective recourse “to hold corrupt regimes and foreign state-owned corporations accountable in U.S. courts for their actions.” The state’s retirement system holds about $92 million in Russian-related investments, according to the treasurer’s office.
The resolution goes further than other states by not just pushing for divestment, it calls for legal resources for state to recoup some of their losses from selling off Russian assets. However the resolution is largely symbolic, according to The Pew Charitable Trusts.
Ohio's five public pension systems, which collectively have more than $210 million invested in Russian assets, are considering how they can best get rid of the holdings, reports the Columbus Dispatch. Ohio Gov. Mike DeWine as issued an executive order telling the pension funds to divest, but the action would require a change in state law.
The board for the State Employees’ Retirement System has voted to divest its roughly $7 million in Russian-related holdings, which represent 0.02% of the system’s $40 billion in assets. It also barred new investments in assets related to Russia or Belarus. The move came days after board of the $72.5 billion Public School Employees’ Retirement System took a similar vote to divest its nearly $300 million directly invested in Russia and Belarus.
The San Francisco City & County Employees’ Retirement System board has voted to halt all new Russian investments by the $35.3 billion pension fund and take steps to divest from existing Russian securities. According to Pensions & Investments, SFERS’ has about 0.11% of the pension fund's total assets in Russian-related investments.
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