NCSL Labor and Economic Development Committee - Policy

Divestment

Expires August 2013

Recent concerns regarding public fund investments in companies doing business in Iran and Sudan have resulted in state legislation regulating pension fund investments. The National Conference of State Legislatures encourages the federal government’s efforts to limit or deny access to the U.S. capital marketplace to firms that are identified as violating U.S. laws, rules, policies or any other decree by providing support to terrorism or aiding in genocide. 

Several firms and not-for-profit organizations provide state and local investors with information about specific firms and their business interests in certain countries. However, this information is not authoritative and lacks the imprimatur of the federal government’s authority regarding whether actions by certain firms in a country are in line with foreign policy goals or run counter to these goals. Thus, investors do not have reliable or pertinent information regarding potential threats certain companies may pose. 

The federal government's intelligence, military, diplomatic and financial regulatory communities are best positioned to identify, monitor and report on foreign and domestic companies that may be engaging in activities with countries that are potentially threatening to our national security, supporting terrorism, against the United States or its allies, and/or  aiding in genocide. Companies who are involved in these atrocities are counterproductive and volatile investments for the future and undermine our security measures. Because the objective of pension systems is to invest money for long term growth, public pension systems desire an unbiased authoritative list of companies in which to avoid investment in order to more effectively ensure the future stability of the fund. 

Recent federal actions recognize the authority of state and local governments’ to divest from or prohibit the investment of state or local assets in companies that may engage in activities that may support terrorism. However, the federal government does not provide investors authoritative information on identifying companies conducting business in or with state sponsors of terrorism. 

The National Conference of State Legislatures urges the federal government to provide authoritative information to U.S. investors, including state and local public pension plans, about foreign and domestic firms and their financial and investment activities in specific countries, such as those identified by the U.S. Department of State as State Sponsors of Terrorism.

Labor and Economic Development Committee