Idaho's Pension System Refuses to Divest $23M in Sudan-Linked Cos.

July 25, 2007 ( - The board that manages Idaho's public pension funds will keep its investments in six companies that do business with Sudan, saying it chooses investments based on financial success, not politics, the Associated Press reported.

In refusing divestment, the Public Employee Retirement System of Idaho (PERSI) is standing the same ground as other public funds who have opted not withdraw their Sudan-linked investments.

Really it’s a policy issue for us,” Judy Olson, the chairman of PERSI, told The Olympian. “We have been asked before to divest from companies that sell tobacco or liquor or that do business in North Korea, and as a policy we don’t limit our managers on those guidelines. We give them financial benchmarks. I’m not sure that legally, we have any choice.”

Some plan sponsors and pension fund managers have also been questioning whether unloading investments based solely on their connections with these governments is in the best interest of pension plan participants (See Public Pension Fund Divestment: A Fiduciary Risk? ). However, Idaho lawmakers announced in February that they would consider a measure to dump the investments as a protest to the government’s inactive stance against the violence in Darfur (See Idaho Lawmakers Consider Forcing Pension Funds to Dump Sudan-linked Investments ).

The investment in companies dealing in Sudan have proved lucrative, earning $81 million on $65 million in investments, Alan Winkle, PERSI’s director, told the AP in February. If the divestment measure passed, the state would have had to sell shares in:

  • Chinese companies Petrochina and Sinopec Shanghai Petrochemical,
  • Alstom, a French turbine maker;
  • Lundin, a Swedish energy exploration company;
  • Petronas, a Malaysian oil and gas company; and
  • Britain ‘s Rolls Royce Group.

Forcing the pension fund to divest these funds would have also caused some administrative issues, Winkle told PLANSPONSOR. PERSI only has a two-person staff to oversee outside investment managers and, therefore, does not have the capability to ensure that they would comply with the law. He says. “How is a two-person staff in Boise, Idaho, going to administer this?” (See Doing the Right Thing? ).

However, PERSI has not abandoned the initiative altogether. System officials have decided to adjust the state’s 401(k) retirement plan to allow employees to select a special, Sudan-free investment fund. The money that is available to cover trading fees and hire a fund manager will depend on how many people sign up for the new option, Olson told The Olympian.

The Arkansas Teacher Retirement System balked at pressure from its legislature to divest its interests in companies that operate in Sudan (See Arkansas Teachers’ Fund Turns Down Divestment Proposal ) and California’s mammoth public pension funds have both vowed to fight such legislation (See CalPERS Balks at Iran Divestment Move and CalSTRS Opposes Broad Investment Bans ).