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The California Public Employees’ Retirement System (CalPERS) today voted to oppose State legislation that would limit the decision-making authority of the pension fund’s Board by prohibiting investments in Iran.
If enacted, the bill (A.B. 221) by Assemblyman Joe Anderson, R-El Cajon, would prohibit CalPERS and the California State Teachers’ Retirement System (CalSTRS) from investing in certain types of international companies with active business operations in Iran.
“We are gravely concerned about terrorist activities throughout the world. But we hold pension dollars in trust, and it is our obligation to invest those dollars for the exclusive purpose of paying benefits for our members,” said Rob Feckner, President of the Board of Administration. “Once we divest from a company, we lose the opportunity to constructively engage that company to bring about positive change.”
The bill would mandate divestment in international companies which may have engaged in business operations with entities in the defense, oil, nuclear, or natural gas sectors of Iran, or are engaged in other business operations with an Iranian organization labeled a terrorist organization by the U.S. government. (Federal law prohibits U.S.-based companies from investing in operations in Iran.) The federal government has not given all American investors similar direction for investing in international companies that affect foreign policy and national security.
The measure would require CalPERS Board to sell or transfer any investments in these companies, subject to meeting the Board’s fiduciary duty. The bill would require CalPERS to report to the Legislature regarding such investments, outlining costs and losses incurred as a result of divestment.
“International assets are a fifth of our portfolio,” said Charles Valdes, Investment Chair. “This bill would mean a potential divestment exceeding $8 billion – $6 billion in equity securities and $2 billion in bonds. The costs come in two forms. The first cost is an estimated $100 million to sell these investments, reinvest the proceeds, and reinvest back into those international companies some day. Our staff analysis shows that if we had not invested in some 50 affected companies over the past one, three, and five years, the loss would have been about $725 million,” he said. “This loss would have to be made up by taxpayers through increased employer contributions.”
CalPERS is the nation’s largest public pension fund with assets totaling more than $245 billion. The System provides retirement and health benefits to approximately 1.5 million State and local public employees and their families. For more information about CalPERS, visit www.calpers.ca.gov.
