Michigan latest State to target Sudan for divestment
July 25, 2007 (LANSING) —Michigan’s state pension systems would be asked to pull their investments in some foreign companies that do business in Sudan and Iran under legislation approved Tuesday by the state House.
If approved by the Senate and the governor, the measures would add Michigan to the growing number of states and universities that are divesting their stakes in foreign companies that deal with nations accused of government-supported genocide or terrorism.
This could be the largest wave of public divestment activity since efforts targeting South Africa and apartheid in the 1980s.
They focus on investments in foreign companies dealing in oil, natural gas and other areas. Supporters of the legislation say it narrowly targets companies that have business relationships with the governments of Sudan or Iran and fail to benefit citizens outside government-controlled circles.
The potential effect on Michigan’s nearly $62 billion state and public school employee pension system has not been determined.
Both bills now go to the state Senate. Gov. Jennifer Granholm supports the bills, spokeswoman Liz Boyd said.
According to the Sudan Divestment Task Force, 19 states and more than 50 universities have adopted some sort of divestment policy related to the African nation, where the government and its military allies are accused of pursuing a genocide campaign in the Darfur region. More than 200,000 people have been killed and 2.5 million others forced from their homes since early 2003.
“As more and more states jump on board, it creates a snowball effect,” said Ginny Mitchell, an Ann Arbor resident who is working with the task force. “It will hit Sudan in the wallet, and that’s what we’re looking to do.”
Most states’ divestment efforts focus specifically on Sudan. But some also target companies investing in Iran, Syria, North Korea and Cuba, which are on the U.S. State Department’s list of terror-sponsoring nations.
One set of Michigan bills would target a relatively short list of foreign companies listed by the Sudan Divestment Task Force. The task force says those companies have not adequately used corporate action to address genocide.
The list, which includes oil companies PetroChina Co. and Sinopec Corp. of China and Petronas Group of Malaysia, is designed to limit the harm to Sudanese citizens and doesn’t affect most of the companies doing business in the nation, according to the task force.
Pension officials in some states have been cautious about the divestment movement, saying their primary duty is to protect funds that hold the retirement incomes of public employees.
Illinois became a leader in the pension divestment movement with a broad law passed in 2005, affecting an estimated $1 billion in investments. But after a legal challenge by the National Foreign Trade Council and representatives of some police and firefighter pension funds, a federal court ruled the law unconstitutional.
The lawsuit claimed Illinois was trying to set its own foreign policy in violation of the U.S. Constitution.
Since then, states have tried more targeted measures that allow flexibility for both pension funds and companies, which many lawmakers say can be the most effective and the safest for taxpayers’ investments. Bill Reinsch, president of the National Foreign Trade Council, said his group continues to monitor what states are doing but that the approach backed by the Sudan Divestment Task Force appears to be a more thoughtful and well-reasoned model.
Last month, Florida became the first state to make its pension funds off limits for investment in any companies doing business with Iran’s energy sector and Sudan. It could affect up to $1 billion of the state’s $150 billion pension fund, but companies will be given a chance to stop doing business with the two nations before Florida would divest.
Ohio legislation to force divestment may be dropped because public employee pension systems have agreed to voluntarily reduce their shares in companies doing business in Iran and Sudan.
Some of the state-level bills now allow opting out of a divestment if it can be proven it would hurt investment returns.
The effort to divest from South Africa in the 1980s eventually helped end apartheid practices.
“It was state by state getting involved in the process, and the federal government getting pushed by state action,” said Rep. Alma Wheeler Smith, a Democrat and sponsor of a bill targeting Sudan. “I think this one will move much faster. This is not new. South Africa was new.”
(AP)