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Institutional Investor Group: Public Pensions Not Making New Russia Investments

Bill Flook  Editor, Accounting and Compliance Alert

Bill Flook  Editor, Accounting and Compliance Alert

The Council of Institutional Investors (CII) said it is not aware of any new direct or indirect investments in Russia by its public pension members, in an April 13, 2022, letter responding to House Financial Services Chair Maxine Waters.

Waters, a California Democrat, sent a round of letters in late March to trade groups seeking information on steps taken to sever their connections with Russia in the wake of the invasion of Ukraine.

CII represents institutional investors with some $4 trillion in assets under management. The group said it “strongly condemns Russia’s invasion of Ukraine and the atrocities being committed against the Ukrainian people.”

“From our discussions with members, we are not aware of any public pensions currently making or considering new direct or indirect investments in Russia,” CII General Counsel Jeffrey Mahoney wrote in the letter to Waters. “In fact, the sanctions imposed against Russia by the international community, the destabilization of the Russian economy, and the decline in the value of the Russian currency have all made it virtually impossible for public pensions to make new direct investments for the foreseeable future.”

Historically, public pensions have not put large amounts of capital in direct investments in Russia, but some pensions do have interest in Russia-linked investments made before the invasion, Mahoney wrote.

“It has been challenging for public pension fiduciaries to deal with these investments for several reasons,” he wrote, citing precipitous drops in the value of those investments and the fiduciary obligations not to divest in a fire sale.

“Additionally, many Russia-linked investments cannot legally be liquidated at this time due to asset sale restrictions put in place by both the Russian government and the international community,” Mahoney wrote.

“Given the challenges, public pension fiduciaries are engaging in deliberative, ongoing processes to evaluate options and establish approaches to addressing Russian investments,” Mahoney added. “In recent weeks, some pensions have announced formal policies to restrict Russian investments. Other pension systems have taken a case-by-case approach, working with their investment managers to identify Russia-linked investments and shield their plans from further losses.”

He wrote that virtually all public pensions are coordinating responses with state and local officials.

Waters’ March 24 letter came days after a committee markup session in which the panel passed a bipartisan slate of bills responding to Russia’s Ukraine invasion, including a measure seeking the exclusion of Russian officials from the Financial Stability Board (FSB), International Organization of Securities Commissions (IOSCO), and other international financial bodies. (See Bill Seeking Ouster of Russian Officials from IOSCO, FSB Clears House Committee in the March 21, 2022, edition of Accounting & Compliance Alert.)

 

This article originally appeared in the April 25, 2022 edition of Accounting & Compliance Alert, available on Checkpoint.

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