The California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) will be forced to sell certain holdings linked to Iran, following a new bill passed by the state senate.
The house passed bill 221 forcing the country’s largest funds to shed any holdings in gas and petrol, defence or nuclear companies and those with links to the Iranian government.
The bill stated: “It is unconscionable for this state to invest in foreign companies with business activities benefiting foreign states such as Iran that commit egregious violations of human rights and sponsor terrorism.”
It continued: “It is the government of Iran, and not the people of Iran, that is responsible for Iran’s support of terrorism and which commits egregious violations of human rights under which its own citizens are required to live.”
Holdings in companies falling into the above bracket would have to be liquidated within 18 months, unless a satisfactory explanation was submitted by the funds’ investment boards.
The ruling would also apply to holdings in commingled funds run by asset managers.
In the first instance, CalPERS and CalSTRS would have to request their assets be removed from any pooled investment vehicle which contravened this new bill.
If this were not possible, the state legislation would allow 18 months for assets to be liquidated from the pooled fund.
Private equity holdings would also come under scrutiny from the bill.
The pension funds are now required to submit an investment report to the senate for inspection on 1 January each year.
This report will identify any remaining holdings, plus transfers, costs and losses incurred by removing these targeted assets from investment portfolios.
Under the new legislation, the pension funds may retain holdings in companies which are “primarily engaged in supplying goods or services intended to relieve human suffering in Iran.”
Investment in companies promoting health, education, journalistic, religious or welfare activities or those authorised by the US federal government would also be permitted.
Bills passed last month in the US House of Representatives have enabled pension plans and mutual funds to voice their opposition to the Iranian and Sudanese governments.
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