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Houston Chronicle: TRS may drop some investments: If companies are linked to Iran or Sudan, policy allows divestment

EXTRACT: The TRS staff has identified 13 companies in which the system invested as of Nov. 30 that have ties to Iran. The investments totalled more than $951 million. Topping the list was Royal Dutch Shell of the United Kingdom, with TRS holdings of $211 million.

By PEGGY FIKAC
Copyright 2007 Houston Chronicle Austin Bureau
Dec. 15, 2007, 12:12AM

AUSTIN — The Teacher Retirement System board voted 8-1 Friday to stop investing in companies doing business with Iran and Sudan and to consider pulling funds from companies that do. The policy included caveats meant to balance state leaders’ call for such divestment with the board’s responsibility to those with a stake in the $114.8 billion pension fund.

“We have a responsibility to a million constituents that we’re responsible to. It’s our responsibility to do the best we can for them within the law and within our fiscal responsibility,” said board Vice-Chairman Linus Wright of Dallas.

Texas legislators approved a law this year requiring Sudan divestment because of atrocities in Darfur. Gov. Rick Perry also has called for the Teacher Retirement System and Employees Retirement System to divest from companies doing direct business with Iran, calling it “an epicenter for terrorist activity.”

Most U.S. companies are forbidden under federal law to do business with Iran, but investments in companies based in other countries could be affected. Some have worried that so-called social investing can conflict with the responsibility of overseers to maximize investment returns.

The TRS staff has identified 13 companies in which the system invested as of Nov. 30 that have ties to Iran. The investments totalled more than $951 million. Topping the list was Royal Dutch Shell of the United Kingdom, with TRS holdings of $211 million.

The new TRS investment policy, which takes effect Jan. 1, says, “Failure of scrutinized companies to remedy their ties to Iran and Sudan will cause restrictions on new investments in the scrutinized companies and the divestment of existing investments in the scrutinized companies if comparable investments offering similar quality, return and safety are available.”

The Teacher Retirement System will keep an updated “scrutinized business operations list” of foreign companies subject to the federal Iran-Libya Sanctions Act of 1996 or any new federal legislation or order.

Companies making that list are those that have invested more than $20 million in Iran’s petroleum sector in any given year since Aug. 5, 1996.

The system also would develop a list of companies doing business in Sudan, using “to the extent possible” a list that the state comptroller is developing and plans to present to the two retirement systems by Jan. 1.

TRS will send a written notice to each listed company warning that it may become subject to divestment. The notice will encourage such a company to “either cease its scrutinized business operations or convert such operations to inactive business operations in order to avoid qualifying for divestment.”

If a listed company continues to have active business operations there after 90 days, TRS will begin the divestment process.

Phillip Mullins of Austin was the only board member to vote against the new policy. He wanted military companies providing assistance to Iran to be included on the list.

Perry, who in September urged the state retirement systems to give him a plan for divestment in 30 days, said through a spokeswoman before the TRS board vote that he “is happy with the proposed investment policy.”

Spokeswoman Allison Castle said, “We are pleased with the progress both TRS and ERS are making toward meeting Governor Perry’s request to divest from companies that do direct business with Iran.”

The Employees Retirement System board in November moved forward with plans to develop a divestment program.

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http://www.chron.com/disp/story.mpl/headline/metro/5380676.html

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