California lawmakers took a step closer Tuesday toward ordering the state’s two giant public pension funds to unload more than $2 billion in retirement money invested in foreign companies doing business in Iran.Despite opposition from state pension board leaders, the Assembly overwhelming passed an Iran divestment measure by El Cajon Republican Joel Anderson. With an initial 68-0 vote, Assembly Bill 221 heads to the state Senate.
“This is a country looking to pick a war. We can’t have our retirement (funds) there,” Anderson said. “This was a big hurdle we crossed today.”
The measure follows last year’s passage of a divestment law requiring the $250 billion California Public Employees’ Retirement System and the $168 billion California State Teachers’ Retirement System to shed Sudan-related holdings.
The law is aimed at prodding companies to pressure the Khartoum government to end ethnic violence that has killed more than 200,000 people in the country’s Darfur region in the past four years.
Modeled after the Sudan legislation, Anderson’s bill calls for CalPERS and CalSTRS — the nation’s two largest public funds — to dump investments in foreign-based defense, petroleum and nuclear companies operating in Iran.
The U.S. government has listed Iran, Sudan, Syria, Cuba and North Korea as state sponsors of terrorism and imposed bans on U.S. companies doing business in these countries. Divestment activists argue Iran’s policies pose a threat to peace.
California and eight other states are considering Iran divestment legislation. Two measures are pending in Congress.
Diana Noel, an analyst with the National Council of State Legislatures, said the Iran campaign is fueled by the success of the Sudan divestment movement that started two years ago with university endowments. Today, 13 states have adopted Sudan divestment programs while 18 others have initiated campaigns.
This year, Iran has surfaced as the latest divestment target — a campaign supported by labor, Jewish and Iranian groups.
CalPERS estimates the Iran divestment ban could affect about $2 billion invested in 19 foreign energy companies. Pension fund officials said the bill could cost the fund $20 million in fees as well as a $66 million loss in asset value. The teachers’ fund has not completed an analysis.
Both pension boards oppose Anderson’s measure, saying they have policies dealing with investments in countries plagued by political and social risks.
Moreover, trustees fear lawmakers will pass divestment mandates for other causes in the future and threaten future investment returns. CalPERS estimates the South Africa pullout to protest apartheid in the 1980s cost it $590 million.
Originally, CalPERS said the Anderson bill could affect $8.5 billion invested in 50 international companies. The investments generated $725 million in returns over the past five years.