Investment laws police NJ’s pension fund

New calls to cut ties to Ben & Jerry’s, fossil fuels would add to list of banned investments
Credit: (AP Photo/David Karp, File)
File photo: The New York Stock Exchange

Earlier this year, state lawmakers received a lengthy report from New Jersey’s public-worker pension fund that exhaustively documented its ties to companies doing business in Northern Ireland.

The report — which cost $7,500 to produce, according to the Department of Treasury — must be drafted every year to ensure compliance with a long-standing state law that was enacted decades ago as a response to alleged anti-Catholic labor policies.

Whether they read them or not, lawmakers also receive several other detailed reports from the pension fund each year, tracking investment activities involving companies doing business in other countries, such as Iran, Israel and Sudan. Each report costs from $7,500 to $10,000.

New Jersey’s pension-fund managers have a responsibility to maximize returns for the system’s many beneficiaries — an estimated 800,000 current and retired government workers. Strong investment returns are not just good for retirees, but for also taxpayers, who help fund the public-worker retirement system.

Despite recent efforts to increase state contributions, New Jersey’s pension fund remains among the nation’s worst-funded state retirement plans due largely to years of insufficient funding by the state.

Investment vs. divestment

Yet in many cases, the same set of New Jersey laws that require those reports on foreign investments can also force the state’s pension-fund managers to eventually discard investments, even if still profitable. That is to make sure New Jersey’s assets aren’t being used to support activities for which investments have previously been banned, such as investment ties to Iran’s government over concerns about its nuclear program, and to Sudan’s government in response to concerns about ethnic cleansing in Sudan’s Darfur region.

And while the last such law was passed in New Jersey in 2016, lawmakers and pension-fund managers in more recent years have been facing pressure to enact new sets of so-called divestment measures.

These include calls to shed any investment related to the firearms industry that have been inspired by concerns about rampant gun violence in the United States.

New Jersey environmentalists have also been pressing the board that oversees the public-worker pension fund to ban investments in fossil-fuel companies because of global climate change. They’ve also backed legislation that would result in a ban on such investments.

“Continuing to underwrite fossil fuels knowing the terrible suffering that will unfold threatens the value of your entire portfolio, all aspects of the global economy and the future of humanity,” said Tina Weishaus, a spokeswoman for the DivestNJ Coalition, during a recent meeting of the New Jersey State Investment Council.

The first such law in NJ

The oldest law policing state pension-fund investments still on the books in New Jersey is the one related to Northern Ireland, which was enacted in 1987, according to Treasury.

Concerns about religious conflict in the region may not be dominating today’s headlines, but the 1987 law still requires the annual report by the pension fund that documents efforts companies make to comply with what are known as the MacBride Principles.

Among other provisions, the MacBride Principles require adequate security for minority workers and the banning of provocative political or religious emblems in the workplace in Northern Ireland, according to the University of Minnesota’s Human Rights Library.

And while the 1987 law requires the annual drafting of a compliance report, it stops short of forcing pension-fund managers to shed any of the investments documented in those reports.

But divestment can be required by New Jersey’s more recent investment laws, such as the one passed by the Legislature five years ago as a response to a movement that uses economic boycotts to protest Israel’s treatment of Palestinians, both in Israel and in territories it has occupied since 1967.

The 2016 law says New Jersey is “committed to supporting Israel” and requires the state to use an outside research firm to routinely identify companies that boycott Israel in alignment with what’s known as the BDS (Boycott, Divestment, Sanctions) movement.

Compliance reports

The next report drafted in response to that law is due in mid-August, according to Treasury spokeswoman Jennifer Sciortino.

In 2018, Treasury officials indicated an investment in a Danish bank had been flagged under the 2016 law.

Some are now questioning whether a recent decision by Vermont-based ice-cream maker Ben & Jerry’s to stop selling products in the Israeli-occupied territories could also trigger the anti-BDS law. The ice-cream company is an independent subsidiary of London-based Unilever, which is a publicly traded company with facilities in Englewood Cliffs.

“The Division of Investment is aware of the situation and is working to determine whether any actions must be taken to ensure continued compliance with the State’s anti-BDS law,” Sciortino said.

Despite ending sales in the occupied territories, Ben & Jerry’s said in a statement that it has no plans to stop doing business altogether in Israel. The company’s founders — who no longer have operational control — also wrote in a recent New York Times op-ed that they support the move.

“The decision to halt sales outside Israel’s democratic borders is not a boycott of Israel,” wrote Bennett Cohen and Jerry Greenfield, who identified themselves as “proud Jews” in the op-ed.

“The company’s stated decision to more fully align its operations with its values is not a rejection of Israel. It is a rejection of Israeli policy, which perpetuates an illegal occupation that is a barrier to peace and violates the basic human rights of the Palestinian people who live under the occupation,” they wrote.

No immediate action required

Even when one of New Jersey’s investment bans is flagged in one of the reports, immediate divestment is not required by law.

For example, language in the 2016 law signed by former Republican Gov. Chris Christie, says the divestment requirement “shall not be construed to require the premature or otherwise imprudent sale, redemption, divestment, or withdrawal” of any current investment.

Instead, the law goes on to say that any such “sale, redemption, divestment, or withdrawal shall be completed not later than 24 months following the effective date of this act.”

The laws policing investment ties to the governments of Sudan and Iran, which were enacted in 2005 and 2007 respectively, established a three-year deadline for action.

While New Jersey has so far stopped short of divesting from fossil fuels despite ongoing calls from environmentalists, pension officials have moved in recent years to adopt new investment policies that look at more than just the bottom line for beneficiaries.

They include the adoption of a new ESG investment policy, which stands for environmental, social and governance, and the recent hiring of a new portfolio manager to oversee sustainable investing.

Earlier this month, the state’s pension-fund managers also indicated they are finalizing a $200 million stake in TPG Rise Climate, a California-based private-equity fund that is seeking to invest in “businesses that have a clear and measurable positive environmental impact,” according to documents distributed prior to the investment council July 21 meeting.

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