US - US state pension funds have rejected government proposals to prohibit investment in companies such as BNP Paribas which do business in Iran.
Many state pension funds currently hold substantial equity in international companies trading with or in Iran.
US$230bn California Public Employees’ Retirement System (CalPERS) information officer Clark McKinley, told Global Pensions the fund held shares in companies which invested in Iran, but as a policy it preferred engagement with these companies over divestment.
McKinley said: “By keeping our place at the table we can work from the inside to accomplish change. Divestment takes away our place at the table.”
Following sustained lobbying by divestment groups, most states believe they already have adequate due diligence processes.
Over the past month, Capitol Hill has heard from myriad lobbyists demanding financial sanctions be placed on Iran.
Director of the Stein Program on Terrorism, Intelligence and Policy, Dr Matthew Levitt, last month told the House Committee on Foreign Affairs: “Targeted financial measures represent the strongest non-military tool at our disposal to convince Tehran that it can no longer afford to engage in dangerous, destabilising activities like proliferation and support for terrorism.”
In a more recent development, Florida pension funds may have to drop all investment in multi-nationals doing business in Iran if a bill by eight state senators is passed this week.
Senator Don Gaetz acknowledged the state’s responsibility to pension funds but maintained: “For us it’s not just business, for us it’s wrong.”
The $9bn Missouri State Employees Retirement System (MSERS) said it invested in an enhanced index fund, specifically established by its treasury, which screened out companies with direct financial ties to governments which appeared on the US State Department blacklist.
However the index did not exclude companies purely on their geographical location.
Director of policy and communications, Mark Hughes, said in this way the decision-making process was carried out by those who administered the scheme.
In a swipe at central government pressure, Hughes said: “It’s different to someone else who is not involved with the investment of those funds telling the investors how to do their jobs – we think that is problematic.”
He added: “Our job is to protect the investments, maximise yield and hopefully make sure that money is not invested in a way that is contrary to the interests of the free world. It’s just another level of protection that investors should engage in to determine their risk adjusted rate of return.”
MSERS returned 17% over the last six months, 4% higher than the MSCI benchmark.
The Pensions and Lifetime Savings Association (PLSA) has announced it will shrink its board by more than one-third as part of a governance overhaul to make it "agile and more appropriate".
Smaller FTSE 350 defined benefit (DB) schemes were nearly 15 percentage points less well-funded than larger schemes in 2017, according to a Goldman Sachs Asset Management (GSAM) analysis.
The advent of collective pension systems could help the UK avoid demographic challenges which will make it "impossible" for society to help savers in retirement, experts say.