NCPA - National Center for Policy Analysis

Thwarting Public Investments that Connect to Terror

March 25, 2003

A move to make state pension fund managers disclose whether they invest in companies which do business in countries connected to terrorism is gaining momentum. Supporters say the move will fight terrorism and protect pension funds by highlighting potential risks. Critics say it will mix politics and business, making smart investment decisions even harder.

The move also raises the old issue of how far states can go to influence foreign policy.

How many companies do business with terrorist-sponsoring nations?

  • The Conflict Securities Advisory Group, Inc., says 370 publicly traded companies have business ties to Iran, Iraq, Libya, North Korea, Sudan and Syria.
  • Last month, New York City's comptroller filed shareholder resolutions with three companies -- Halliburton, General Electric and ConocoPhillips -- calling for the firms' boards to review their links to Iran and Syria.
  • New York City has more than $1 billion invested in the firms through its police and firefighter pension funds.

The U.S. Supreme Court ruled unanimously in 2000 that states cannot seek to influence foreign policy through their purchasing and investment decisions. In response, city and state governments instead are choosing to approach companies directly and focus on shareholder risk associated with investing in these countries.

How are city and state governments responding?

  • The Claremont Institute has written lawmakers in all 50 states urging them to disclose investments in suspect countries as a matter of law.
  • The Arizona House and Senate have approved legislation requiring firms that manage state money to file reports on where the money is invested.
  • Pennsylvania's House passed a bill in December 2001 to bar investment of public money in countries that sponsor terrorism, however, the bill died in the State Senate.

Source: Brian Mitchell and Michael Miklofsky, "As Part of War on Terror, States Look at Investments," Investor's Business Daily, March 25, 2003.

 

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