State Pension System Divests of Many Assets in Russia, But $28 Million Remains
Maryland’s State Retirement and Pension System currently holds $28 million in Russian stocks and bonds, but state officials told the legislature’s Joint Committee on Pensions on Thursday that they are working hard to divest from Russia entirely.
This is a significant decrease from the market value of $197 million that Maryland had invested in Russia at the start of February, which at the time represented about 0.33% of the state’s portfolio, according to Martin Noven, executive director of the State Retirement Agency.
But through divestment and devaluation of investments, the investment value decreased to $32 million within the last month.
By the end of the 21-minute committee meeting, that value had dwindled to $28 million, according to the Department of Legislative Services.
“We’ve been working hard to divest from the entire portfolio,” Noven said.
Since Russia launched a military invasion in Ukraine last week, numerous state governments, including California, Colorado, New York and Ohio, have started pulling investments from Russian companies to condemn the country for invading another sovereign nation.
Although divestments imposed by U.S. states pale in comparison to national sanctions, such actions from state leaders offer a signal of solidarity with Ukraine.
The Joint Committee on Pensions met briefly Thursday afternoon, before regularly scheduled committee meetings, to better understand the state’s holdings in Russia and to discuss next steps “to make sure that Maryland is not contributing to an international crisis,” said Sen. Sarah K. Elfreth (D-Anne Arundel), a co-chair of the committee.
“It’s hard to remember or recall a time when the world’s financial markets have acted so quickly…to condemn this unprovoked invasion,” said Del. Brooke E. Lierman (D-Baltimore City), the other committee co-chair.
Before the meeting, Gov. Lawrence J. Hogan Jr. (R) and Comptroller Peter V.R. Franchot (D) had called on the state’s pension system to divest from Russian entities. Franchot is one of 10 Democratic candidates for governor and is the chair of the pension system’s board of trustees.
Of the $35 million of assets the state has in Russia, Maryland directly owns $7 million, according to Noven. This includes $600,000 in companies that have been sanctioned, which the pension system is trying to divest from, its spokesman Michael Golden said.
Maryland’s pension system invests in companies that have relationships with companies in Russia, said Andrew C. Palmer, chief investment officer for the system. But the pension system is only divesting from companies that are headquartered or operating directly in Russia, as opposed to companies that are also engaging with Russia, he said.
Sen. James C. Rosapepe (D-Prince George’s), a former U.S. ambassador to Romania, asked why the scope of companies targeted for divestment was so narrow.
Palmer said that taking wider action “might not be fiduciarily prudent” because “such a large part of our portfolio would be impacted by such a restriction.” He also said that focusing only on companies operating in Russia aligns with the federal government, which has not precluded private companies from transacting with Russia.
Del. Kirill Reznik (D-Montgomery), who is Ukrainian-American, also said that not divesting from companies engaging with Russia is “a little problematic” because “that’s where they’re getting most of their revenue from.”
This is not the first time the state has dumped its investments in foreign countries. In 2008, the Maryland General Assembly passed the Divestiture from Iran and Sudan Act, which required the state pension system to divest from companies doing business in Iran or Sudan.
Noven said legislation directing the state’s pension system to divest from Russia would be helpful because “we want [our investors] to be colorblind when it comes to these types of policy issues and just focus on making returns” and instead have a clear directive. He said that the system invites legislation only during “exceptional situations,” such as in 2008 and now.
Only the legislature can require the pension system to divest from assets in Russia, Elfreth said.
The U.S. government has already imposed several rounds of sanctions, including prohibiting Russia’s central bank from making transactions in U.S. dollars. On Wednesday, the U.S. Justice Department announced a task force to target Russian oligarchs who have aided President Vladimir V. Putin in his invasion of Ukraine.