It's about Time!

Bloomberg

Calpers Pressed to Drop Iran `Terrorism' Investments (Update1)
By Alison Fitzgerald

March 19 (Bloomberg) -- California lawmakers are considering legislation that would force state pension funds to sell billions of dollars of shares in companies doing business with Iran.
The California Public Employees' Retirement System, the largest U.S. pension fund, and the state teachers' fund would have to unload shares in companies including BNP Paribas of France, Siemens AG of Germany and Eni SpA of Italy.

``Who's funding terrorism? It sure as hell shouldn't be our public employees,'' said Joel Anderson, a Republican assemblyman from El Cajon who introduced the measure. ``When you're looking at the war on terrorists, this is one of the best weapons we have -- just defunding them.'' Anderson estimated his legislation would affect $24 billion worth of investments.

California, which last year directed state pension funds to drop investments in Sudan, is among a growing number of U.S. states, from Texas to Maryland to New Jersey, moving to embrace so-called ``terror-free'' investing.

The movement, which includes federal legislation, against nations the State Department says sponsor terrorism, may put public pension managers in a front-line role in a debate over international policy. Some critics say the effort is misguided and would hurt small investors.
Calpers and the California State Teachers' Retirement System control $388 billion in investments. The legislation would affect overseas-based companies, since U.S. businesses are already mostly barred from trading with the countries on the State Department list: Iran, Sudan, Cuba, North Korea and Syria.

Federal Action

U.S. Congresswoman Ileana Ros-Lehtinen of Florida, the senior Republican on the House Foreign Affairs Committee, introduced a measure last week that would require U.S. government pension funds to divest stocks of companies that invested more than $20 million in Iran's energy industry.
``This measure will serve as one more critical instrument to deny the Iranian regime the economic resources required to pursue its dangerous activities,'' she said in a statement.

If public funds are forced to divest, he said, ``the real losers would be a bunch of retired policemen and firefighters.'' That's because pensions would have to sell international mutual funds, which have had high returns, he said.

The Bush administration has ratcheted up its criticism of Iran's government, accusing it of supplying insurgents in Iraq with weapons to kill U.S. troops.

Supporters of Israel, which has been the target of threats by Iranian President Mahmoud Ahmadinejad, are backing the move to pressure Iran.

The American Israel Public Affairs Committee, the main U.S. pro-Israel lobbying group, will support divestment efforts against Iran in 10 states this year, Howard Kohr, executive director of the Washington-based group, said in a March 12 speech. Divestment ``would have a crippling effect on Iran's economy,'' Kohr said.

Shareholder Activism

A campaign to force companies to divest may affect ``a significant number of the world's largest companies,'' said Roger Robinson, who heads a company that tracks investing in terrorist nations. Robinson, a National Security Council aide in the Reagan administration, said he has no position on the California bill.

Edwina Frawley, a spokeswoman for Paris-based BNP Paribas, declined to answer questions about Iran. She said the company complies with ``all current ethical standards and regulations.'' Munich-based Siemens didn't respond to an e-mail request for comment, and a spokeswoman for Rome-based Eni declined to comment.

The California legislation puts Calpers, a leading proponent of good corporate-governance practices, in the position of being criticized itself.
``They have historically prided themselves on being ahead of the curve on issues like this,'' said Reinsch of the foreign trade council. ``One would think they would be ahead on this one.''

Missouri, Georgia
Missouri has adopted a policy to require two state funds to divest from companies that do business with Iran, Sudan, North Korea and Syria. Georgia is also considering such legislation, and a bill will be introduced in Ohio next week.

Missouri State Treasurer Sarah Steelman said she made the decision after learning the state was using BNP Paribas, France's biggest bank, to place its overnight money. It had been named as one of several European banks that lent $1 billion to Iran.
``We kicked them off our broker-dealer list and put in place policies that said we won't do business with companies that do business in Iran,'' she said.