North Dakota’s State Investment Board Gives The Green Light to Stop Investing in Russia
Bismarck, ND (KEYZ) - After getting enormous pressure from the public, as well as from members of both side of the isle in North Dakota, in the wake of Russia’s invasion of Ukraine, the State Investment Board convened a special meeting Thursday to discuss divesting its Russian holdings.
During executive session, the SIB voted unanimously to pursue the divestment strategy.
As of Monday, North Dakota had a total of $15.9 million in investments with Russian exposure across the state’s Legacy Fund, pension fund, and insurance pool overseen by the SIB, according to the state Retirement and Investment Office.
Board members were informed at the meeting that Russian exposure has already been reduced by $5.9 million, to $10 million. The remaining balance will be significantly harder for North Dakota to divest from Russia, as investment managers have exited investment positions and the value of investments within Russia have dropped.
“Everybody is on board with divesting from Russian investments. It’s just sometimes it’s not as easy as clicking the sell button. This is going to take time and it’s going to take a lot of effort from staff, but the public needs to know that RIO staff and our managers are doing everything they can to unwind these positions as quickly as possible.” SIB member Troy Seibel.
A shrinking marker for Russian investments is not the only reason it may take more time than the critics would like to completely divest. "Equities are in a fund for which the North Dakota RIO does not have discretion at the securities level, nor do our managers who are investing those securities." RIO Chief Investment Officer Scott Anderson said.
Of the $10 million still in Russian investments, $7.8 million is in commingled1 funds that have multiple investors, and the SIB doesn’t have authority to divest from individual securities within those commingled funds. For the SIB to withdraw from Russian investing completely, it would have to pull its entire investment in the commingled funds, a total of $950 million.
Alarms were sounded for potential pitfalls in the process of divesting from Russia by House Minority Leader Josh Boschee, who was concerned that the recently passed SB 2291 does not allow for money managers or the State Investment Board to make decisions on investments based on social policy.
News Radio reached out to Harvard Professor Mark Wu on any implications that SB 2291 could have in the process. “The decision at hand concerns divestment, as opposed to investment. While the state law places restrictions on the State Investment Board’s investment decisions, it does not place similar restrictions on its divestment decisions." Professor Wu continued, "What this means practically is that the state investment board could take geopolitical considerations into account for a divestment decision, but should it then decide to divest, the existing law would place restrictions on what the board can and cannot do in deciding how to re-invest the proceeds of the divestment.” Professor Wu is the Henry L. Stimson Professor at Harvard Law School, where he specializes in international trade and international economic law.
Calls for divestiture were first championed by Senator John Hoeven, and North Dakota Democratic-Non-Partisan League 2020 nominee for Governor Dr. Shelley Lenz. The later of whom is calling for further course correcting, as the SIB still has investments in several countries on human rights watch lists, oil producing countries in direct competition with North Dakota, as well as an oil company with close ties to the Peoples Liberation Army in China.
Investments into other nations or questionable entities were not broached during the public portion of the meeting.
The SIB’s next regularly scheduled meeting on March 25th.
The North Dakota Board of University and School Lands also had approximately $28.8 million invested in Russia-based companies as of Monday.
1A commingled fund is when an investment manager accumulates money from several investors and combines it into one fund. Like mutual funds, commingled funds are overseen and managed by portfolio managers who invest in a range of securities. Unlike mutual funds, commingled funds are typically not regulated by the SEC.