At the United States Holocaust Museum in Washington, D.C., an entire room is devoted to the tragedy of the genocide in Darfur, reminding those who remember the Holocaust to not sit back and accept similar current-day catastrophes.
But while the actions of ordinary citizens can be limited, they can still speak up with their wallets. And, according to those spearheading the divestment movement, they can make a difference.
As Pennsylvania prepares to join the ranks of 28 other states that have implemented policies mandating divestment of state employee pension funds from companies doing business with Iran and Sudan, citizens can feel good that their money will no longer be used to enrich the economies of these rogue nations.
Senate Bill 928, which the Pennsylvania House of Representatives unanimously passed last week, is awaiting the signature Gov. Edward G. Rendell as its final step to becoming law. Rendell is expected to sign the bill this week.
The bill would require Pennsylvania’s $400 million in pension fund investments in the Public School Employees’ Retirement System, State Employees’ Retirement System and Pennsylvania Municipal Retirement System to divest from foreign companies that do business with Sudan and Iran. The bill also would put the same restriction into law for the state Treasurer’s Office.
U.S. companies are already prohibited from such investments.
The movement to end state investments in Sudan and Iran began in 2004, and was launched by the Center for Security Policy, a think tank in Washington, D.C.
When Christopher Holton, a vice president of the Center, was tapped to head its Divest Terror campaign, he says he got more than he bargained for. Believing most states would be eager to cut their ties to terrorist states, Holton thought his “activist operation” would wrap up after a year or two.
Instead, he came across profound resistance to the movement.
“The opposition to cutting off life support to the ayatollahs is disheartening,” Holton told The Chronicle.
In trying to get states to enact these divestment laws, he has found “a broader and overarching conflict between the pension systems and the state legislatures,” he said.
Explaining that many of the state pension systems resist interference in their management, he has seen “a huge battle in about every state.”
But because the employees who contribute to the pension funds are indeed state employees, Holton believes there is “no basis for saying the legislature should not oversee these pension systems.”
“This is the states deciding where and where not to put their money, period,” Holton said.
Restricting pension fund investments is nothing new, he added, noting that some states have enacted policies requiring fund divestment from tobacco companies, companies manufacturing firearms or those perceived to be contributing to global warming.
“In this case, we have a country, Iran, which is actively engaging in actions that result in the death of Americans,” Holton said. “There is a moral issue at stake here, and there really is no argument against it except the pension funds not wanting to be told what to do.”
“No one wants to be on the side of a country that’s killing American G.I.s and threatening to wipe Israel off the map,” he added.
A pioneer in terror divestment policy, Sarah Steelman, as Missouri’s State
treasurer, led the Show-Me State to become the first in the nation to prohibit pension fund investment in Iran, Sudan, North Korea and Syria. She was also surprised to encounter strong opposition from the pension funds, which did not want to relinquish control over their investment decisions.
“Why would we want to help companies that are helping our enemies?” asked Steelman, who was also elected as a state senator in 1998 and 2002, and ran for governor of Missouri in 2008.
While Missouri never passed a terror-free investment law, Steelman, while she was treasurer, decided that Missouri was not going to invest in any company that did business with a state that sponsored terrorism. Because she sat on the pension board, she was able to change its governance policy, but not without resistance.
“There was a huge fight in the public pension board. It was unbelievable that people did not make the connection,” she said.
After Steelman left the board, “they undid my policy,” she said. “When I got off [the board], nobody cared anymore. But all across the country, states are [enacting terror-free investment laws].”
In addition to resistance from the pension boards, the Divest Terror movement has also fielded opposition from the National Foreign Trade Council, a U.S.-based lobby group promoting an open world trading system.
The NFRC has argued that state divestment laws “are trying to dictate foreign policy,” Holton said. “But that argument was incredibly weak.”
The NFRC has been less vocal on the issue in recent years, Holton said.
The NFRC did not respond to inquiries from The Chronicle.
Another argument posed by opponents to terror-free investing is that divestment from companies doing business with rogue nations could hurt portfolio returns.
“There is no empirical evidence that divestment from Iran has negatively affected portfolio performance,” Holton said. “In fact, the empirical research shows the opposite.”
After divesting Missouri’s funds from states that sponsor terror, Steelman said those portfolios did better than the MSCI benchmark for the year.
With one of its goals being to encourage foreign companies to pull its business from Iran and Sudan, the divestment strategy seems to be making a difference.
“I’ve seen companies pull out [of rogue states] as a result of the public pressure of divestment, as well as other sanctions,” Steelman said.
The German firm Siemens has left Iran, as has French energy group Total, BP and Royal Dutch Shell, among others.
To demonstrate what a difference a divestment policy can make, Holton points to 1980s South Africa.
“Divestment put the issue [of apartheid] on the front page,” Holton said, “and encouraged Congress to take action against South Africa.”
Congress is following suit on the Sudan and Iran issues as well, as is evidenced by last week’s passage of the Comprehensive Iran Sanctions, Accountability, and Divestment Act of 2010.
“The states are leading the way,” said Holton.
While divestment encourages companies to cease dealing with Iran and Sudan, Holton is skeptical that it can, by itself, influence changes in those countries’ policies.
“Iran is such a bad actor on so many levels,” Holton said. “It is continuing to sponsor the Taliban, and enriching uranium in violation of the U.N. Security Council. No, Iran’s behavior has not changed as of yet. But whether or not Iran will change, most people in the States don’t want their money supporting Iran.”
Divestment need not be limited to public funds, Steelman said, but should be a consideration of “every American citizen looking at their individual portfolios. This is something that every American can contribute to fight against terrorism.”
(Toby Tabachnick can be reached at firstname.lastname@example.org.)