The Kansas Public Employees Retirement System has invested nearly $36 million in Russian assets, the agency said Monday, as officials weigh in on whether they should ultimately end those investments in light of the invasion of Ukraine by the country.
But we don’t know where the decision to part ways would come from. A senior lawmaker said the pension fund’s board would likely be responsible for making the final decision, while a KPERS official said the decision would likely have to come from the legislature.
A KPERS spokesperson said the investment in Russian securities, which totals $35.9 million, represents 0.14% of the portfolio’s $25.2 billion in assets.
The investments are all publicly traded stocks in KPERS’ international equity portfolio, spokeswoman Kristen Basso said in an email. The agency was monitoring the issue to ensure it complied with federal government sanctions against Russian banks and state-owned companies, she added.
“We are monitoring the situation closely and will take appropriate action to protect the interests of our members and their beneficiaries,” Basso said.
Russia’s invasion of Ukraine has caused widespread international outcry and US sanctions have tightened pressure on the Russian economy, President Vladimir Putin and his allies. The sanctions have also directly prompted other states’ pension funds to consider ending their investments in Russian-backed companies.
Colorado, for example, currently has more than $7 million invested in a Russian state bank sanctioned by the US Treasury Department.
The decision to divest is part of a broader suite of actions ordered by Governor Jared Polis, including a pause on any state contracts with Russian companies and the decision to remove Colorado from the coverage area of the Russian consulate in Houston.
In a statement, Governor Laura Kelly did not specifically mention what actions her administration was planning, but said “Kansas has a lot in common with Ukraine” and stressed that the state stands in solidarity with the country.
“We have reviewed and continue to review business continuity plans to ensure we remain vigilant in the event of cybersecurity attacks against Kansas,” Kelly said. “Furthermore, we will continue to closely monitor developments in Ukraine and work to shield Kansans from any potential international economic impact.”
Rhode Island officials, meanwhile, announced on Monday that they would divest Russian stocks and bonds in a bid to stand with Ukraine.
Unclear if Kansas will join states in divestment of Russian assets
The Legislature has gotten involved in similar issues in Kansas in the past.
In the late 2000s, for example, the pension fund had to divest itself of companies doing business in Sudan, which was in the midst of a brutal series of human rights abuses in the Darfur region. About $15 million in assets were ultimately affected, according to a pension fund report submitted to lawmakers.
Legislation introduced in 2011 would have required KPERS to spin off companies operating in Iran, although that effort ultimately failed.
But Rep. Steven Johnson, R-Assaria, chairman of the House Insurance and Pensions Committee, said divestment was not a straightforward process and he noted he was reluctant to see the Legislative Assembly get involved.
While a surrender decision was worth considering, Johnson said, there were also hurdles that would make it difficult to unwind in a timely manner.
This means that Kansas could still try to divest itself of its Russian investments, even after the end of the war in Ukraine. And given the limited scope of state investment in the country, this decision would ultimately prove to be mostly symbolic.
“What we can do certainly matters, how the Kansans’ investments are invested certainly matters,” Johnson said. “And I don’t wish to minimize that. But those key roles fall to KPERS board members.”
But Jim Zakoura, an Overland Park attorney who chairs the KPERS board, said the legislature is likely to launch the divestment campaign.
Zakoura added that he was confident that the fund’s diversification, along with the relatively paltry level of investment in Russian assets, would mean that KPERS would not be impacted too much one way or another.
“We will certainly continue to monitor this and we will certainly follow the direction that the legislation provides,” Zakoura said. “But apart from that, we’re really going to be focused… on absolutely protecting the funds we are stewards and trustees of and investing for their highest return consistent with security.”
Ukrainian officials called for a ceasefire in the war on Monday, as representatives of the two countries met for the first time since the invasion was launched last Wednesday. The Russian economy has been hit hard by international sanctions, with the country’s currency plummeting in recent days.
Andrew Bahl is a senior reporter for the Topeka Capital-Journal. He can be reached at [email protected] or by phone at 443-979-6100.