Comptroller Thomas DiNapoli said in the announcement that the retirement system will embark on a three-step process to completely drop the pension funds’ investments in these companies, which total $750 million, or 1% of the fund’s $154.5 billion assets.
According to the announcement, the three phases of the divestment plan are as follows:
- Phase 1: Extensive research over the next three months to identify the companies the pension fund has invested in that might be engaging in objectionable practices in Sudan.
- Phase 2: Encourage Sudan-linked companies to withdraw from Sudan or to begin taking substantial action aimed at providing carefully constructed humanitarian aid and relief for the Sudanese people.
- Phase 3: DiNapoli will develop strategies of divestiture from those companies that he determines have failed to take substantial action, if following a process of due diligence he determines that it is consistent with his fiduciary responsibilities.
“My first responsibility is to fulfill my fiduciary duty as sole Trustee of the Fund,” DiNapoli said in the announcement. “The pension fund must be managed for the benefit of the members, beneficiaries and retirees, but I’m confident the members of the Retirement System do not want the pension fund to support governments that engage in genocide. And investing in companies that lend aid to these regimes is not conducive to long-term investment strategies.”
Some pension experts argue that ordering divestment puts plan sponsors on shaky fiduciary ground when they make investment decisions based on social principals rather than what will produce the best returns for the participants (See Doing the Right Thing? and Public Pension Fund Divestment: A Fiduciary Risk? ).