Pension funds urged to end ties to terror

Public pension funds, which manage multibillion-dollar retirement accounts for teachers, police officers, firefighters and other civil servants, are coming under increasing pressure to divest from companies with ties to state sponsors of terrorism.

Lawmakers at federal and local levels have pressured U.S. companies and pension funds to more carefully explain and document their relationships with countries such as Syria and Iran. The effort is intended to pressure companies to choose between American investors and legal business opportunities in rogue states.

“It is … unconscionable for our country’s public-pension systems to permit investment in companies that provide revenues, advanced equipment and technology to countries that threaten our vital security interests,” Sen. Frank R. Lautenberg, New Jersey Democrat, said in an Aug. 5 letter to state pension-fund managers..

The top pension systems in the United States have invested an estimated $188 billion in companies with legal projects in or sales to countries such as Iran, Libya, Sudan, Syria, North Korea, and Saddam Hussein-era Iraq, the Center for Security Policy said last week in a report meant to quantify the investments.

The U.S. State Department considers those countries, as well as Cuba, state sponsors of terrorism.

“Americans do not want to invest in terror, directly or indirectly. Regrettably, that is what is being done on a massive scale today,” said the center, a nonprofit think tank in Washington.

The Virginia Retirement System, for example, holds almost $4.9 billion in investments in 213 companies with ties to terrorist-sponsoring states.

The state’s retirement system was worth $39.1 billion at the end of the fiscal year on June 30, with a one-year return of 17 percent. The S&P; 500 over the period also rose by 17 percent.

The fund invested in companies that are major, publicly traded multinationals common in index funds purchased by institutional investors. They include French telecommunications equipment supplier Alcatel, French Bank BNP Paribas, French energy company Total, Italian energy company ENI and South Korean manufacturer Hyundai Heavy Industries.

The Maryland State Retirement and Pension Systems invests in 89 companies with ties to terrorist-sponsoring states, and the District of Columbia Retirement Board invests in 77 companies with such ties, the center said.

The companies include German telecommunications firm Siemens, Norwegian energy giant Statoil and Swiss bank UBS.

The Maryland systems held $30 billion in assets as of June 30. Overall equity returns for the year were 23.1 percent, the Maryland Retirement and Pension Agency said.

The District’s fund was valued at $2.23 billion at the close of fiscal 2003 on Sept. 30, with a one-year return of 16.3 percent, according to the retirement board’s Web site.

Different pension funds take different tacks on the issue, although few aggressively review investments for ties to terrorism.

“The [Virginia Retirement System] is not in a position of being able to evaluate who is aiding terrorism and who is not. The retirement system is not a foreign-policy expert — we look to the federal government to provide guidance to that effect,” said Jeanne Chenault, the system’s public-relations director.

Story Continues →