Finance

Russia divestment promises by US states largely unfulfilled

Kathy Hochul

Driven by moral outrage over Russia’s invasion of Ukraine earlier this year, U.S. governors and other top state officials made it clear: They wanted to cut their financial ties with Russia.

A few states quickly followed through. Idaho sold $300,000 of bonds in a Russian oil company in early March. A day before the invasion, the Kentucky Teachers Retirement System sold its shares in the Russian bank Sberbank.

But those examples are outliers. Six months into a war that has killed thousands of Ukrainians and displaced over 12 million more, most of the pledges to drop Russian investments — some made with great fanfare during news conferences — have gone unfulfilled, according to an Associated Press review, state retirement administrators and firms that invest state funds.

Swift global reaction has cut off much of Russia’s economy from the rest of the world. That has made it nearly impossible for divestment by state pension funds, university endowments and other public-sector holdings — as well as private investments such as those in 401(k) accounts.

“These pension funds want to get out, but it’s just not realistic to sell everything in the current environment,” said Keith Brainard, research director at the National Association of State Retirement Administrators.

Benjamin Smith, a spokesperson for the Rhode Island treasury, said the factors that make it hard to divest also show that a worldwide effort to isolate Russian President Vladimir Putin is working.

“This is good news because it means that pressure from investors across the world, including Rhode Island, is succeeding in exacting a toll on the Russian economy, making it more difficult for Putin to fund his military operation, state-owned companies, and corrupt network of oligarchs,” he said in an email, noting that Rhode Island’s pension plan exposure in Russia never exceeded 0.3% of its assets.

Any pre-war investments in Russia are now worthless, or nearly so. That’s raising questions from some officials and fund managers about whether divesting is even necessary.

In Hawaii, one of a handful of states where top administration officials did not pledge to divest, Gov. David Ige said at a May 5 news conference that the state’s employee pension system had “very little to almost nothing” invested in Russia.

“The few remaining investments are quite small, and so I didn’t feel compelled to just make a statement for political reasons that we would be divesting,” he said.

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