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Review: Sudan/Iran Divestiture

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Title: Review: Sudan/Iran Divestiture


1
Review Sudan/Iran Divestiture
Iran
Sudan
  • June, 2007

gregory.w.group
2
Brief History of Divestitures
  • March 1, 1928 Pioneer Fund launched excludes
    tobacco and alcohol companies, sin stocks
  • 1980s public pensions and university endowments
    divested companies doing business in South Africa
    during apartheid
  • 1997 Congress passed sanctions preventing US
    companies from doing business in the Sudan
  • January 27, 2006 Illinois first state to pass
    Sudan Divesture Legislation (Illinois Public Act
    94-79)
  • February 23, 2007 Federal court strikes down
    Illinois law
  • June, 2007 California, Florida and Ohio pass
    legislation to force their Pension Systems to
    divest from Sudan and Iran.

3
Statistics Sudanese Investments
  • 81 US Public Pension portfolios with over 91
    billion in assets believed to be exposed to
    Sudan1
  • Northern Trust has attracted over 7 billion to
    Sudan-free investment vehicles
  • The state of Texas two major pension funds,
    which together total 132 billion, hold about
    700 million in shares in companies on various
    Sudan watch lists

1Northern Trust 2Social Investment Organization
4
Estimates Iranian Investments
  • Data on the extent of Iran-linked investments is
    difficult to obtain. The issue develops daily.
    We found the following published estimates of
    exposures for several large State Pension
    Systems.
  • Ohio 4 billion
  • CalPERS CalSTRS 2 billion to 24 billion
  • Florida 1 billion
  • New York 1 billion
  • CalPERS officials estimate a ban on Iranian
    investments could cost the fund 20 million in
    fees and commissions and 66 million in
    associated transactions costs. Exposure to
    companies that could be affected by the bill
    generated 725 million in returns over the past
    five years.

5
State by State Activity
Source Sudan Divestment Task Force As of June 1,
2007
6
Companies Facing Divestiture
  • Over 160 foreign companies
  • Less than 10 domestic companies
  • Representative list of companies
  • Alcatel - Sudan
  • ENI - Iran
  • Gazprom - Iran
  • Halliburton - Iran
  • Indian Oil - Iran
  • INPEX - Iran
  • Lukoil - Iran (20 owned by ConocoPhillips)
  • Norsk Hydro - Iran
  • OMV - Iran
  • Petrobras - Iran
  • Repsol - Iran
  • Royal Dutch Shell - Iran
  • Schlumberger - Sudan
  • Siemens AG - Sudan

7
Issues
  • Implementation
  • Complex, expensive, and time-consuming
  • Compliance issues - particularly commingled
    vehicles and partnerships
  • Legal
  • Constitutional challenges
  • Cost
  • Investment performance
  • Limits investment manager access
  • Fiduciary
  • Potentially undermines duty to seek best return
    for beneficiaries

8
Current Legislative Activity
  • Illinois public funds are working with
    legislators to gain relief from the more
    challenging elements of their divestiture
    legislation
  • Texas State Senate approved a bill forcing the
    States Pension Plans to sell or transfer any
    current investments tied to Sudan
  • Trustees of Arkansas Teacher Retirement System
    rejected a nonbinding resolution from legislators
    encouraging the divestment of Sudan-linked
    companies
  • The California Assembly passed a measure that
    would force the states pension funds to divest
    their holdings in Iran-linked companies despite
    trustee opposition
  • Ohios public pension funds will divest half of
    their investments in companies with links to
    Sudan and Iran

9
Proposed Federal Legislation 110TH CONGRESS
1ST SESSION H. R. 2347
  • LIST OF PERSONS INVESTING IN IRAN ENERGY SECTOR.
  • (1) PUBLICATION OF LIST.Not later than 6 months
    after the date of the enactment of this Act and
    every 6 months thereafter, the Secretary of the
    Treasury, in consultation with the Secretary of
    Energy, the Secretary of State, the Securities
    and Exchange Commission, and the heads of other
    appropriate Federal departments and agencies,
    shall publish in the Federal Register a list of
    each person, whether within or outside of the
    United States, that, as of the date of the
    publication, has an investment of more than
    20,000,000 in the energy sector in Iran. The
    list shall include a description of the
    investment made by each such person, including
    the dollar value, intended purpose, and status of
    the investment, as of the date of the
    publication.

10
California Public Employees Retirement System
  • "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.
  • Once we divest from a company, we lose the
    opportunity to constructively engage that company
    to bring about positive change.
  • Rob Feckner
  • President of the Board of Administration
  • CALPERS

11
Third Party Vendors
  • Compile socially conscious and terror free
    lists
  • Lists are published and purchased monthly
  • Investment management firms must continually
    purchase lists
  • Leading firms
  • KLD Research and Analytics
  • Institutional Shareholder Services
  • Conflict Securities Advisory Group
  • This activity may become obsolete if H.R. 2347
    passes (Iran only)

12
Divestiture Resources
  • Sudan Divestment Task Force www.sudandivestment.
    org
  • Institutional Investment News
    www.plansponsor.com
  • Third Party Screening Tools www.kld.com
  • Our Weblog http//targetdivestiture.blogspot.com

13
gregory.w.group
  • Independent Investment Consultants
  • Full Suite of Services
  • Employee Owned
  • Significant Public Fund Success
  • Focused on Institutional Investment Management
  • Founded in 1989

14
Contact Information
  • Gregory T. Weaver
  • President
  • 918.583.1005 office
  • 918.810.9611 mobile
  • gweaver_at_gregorywgroup.com

Douglas J. Anderson Senior Vice
President 918.583.1005 office 918.810.9612
mobile danderson_at_gregorywgroup.com
dallas office 2911 turtle creek
boulevard dallas, texas 75219
tulsa office 15 west 6th street, suite
2901 tulsa, oklahoma 74119
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