Since the start of the war in Gaza, dozens of protesters have called on Minnesota pension funds to divest from their Israeli holdings.
State leaders say they should only be concerned with maximizing returns on pension investments to maximize their chances of paying pension benefits to retired state employees and teachers, but the state has walked away from deals with other states before.
In recent years, the debate over divestment has revolved around the concept of “fiduciary duty,” a duty focused on maximizing returns.
“All the people have given me is the authority to review matters that affect the fund,” State Auditor Julie Blaha, who sits on the National Investment Committee, said in an interview last month as protesters called for divestment from Israel. “You can’t use your investment to make a symbolic statement.”
Blaha said he believes it’s the Legislature’s job to set investment policy, as has been the case with divestment decisions over the past 15 years. But divestment from South Africa and Namibia in the mid-1980s was pushed by executive leaders because they believed Minnesota should not support the apartheid regime, according to meeting minutes and other archival documents reviewed by the Star Tribune.
Russia, Sudan, Iran
Following Russia’s invasion of Ukraine in 2022, the Legislature voted in March 2022 to stop investing in Russia and Belarus, and Gov. Tim Walz ordered the state to stop contracting with companies from the two countries and urged the Legislature to pass a divestment bill.
At the time, Minnesota held about $53 million in Russian investments and was given 15 months by law to sell its holdings in Russia and Belarus.
The 2022 congressional move mirrors previous withdrawals from Iran and Sudan.
Minnesota was required by state law in 2007 to divest from companies doing business in Sudan, and the state monitors companies doing business in the country but still doesn’t allow pension funds to invest in them.
The divestment from Iran came after members of the Jewish Community Relations Council raised concerns about investing in companies doing business in Iran at a meeting of the National Investment Committee in 2008. In response to the group’s concerns, Congress passed a law in 2009 restricting investment in companies doing business in Iran.
South Africa
Unlike subsequent divestment, the 1980s push for Minnesota to stop investing in companies operating in South Africa began not with the state legislature but with statewide elected leaders who vote on investment decisions.
Then-Governor Rudy Pelpich, Attorney General Hubert H. Humphrey, Secretary of State Joan Anderson Groh and State Treasurer Robert Mattson began divestment in Minnesota in October 1985 by passing a resolution at the State Investment Board over the objections of then-State Auditor Arne Carlson.
After more than a decade of protests against the South African apartheid system, states and state universities began to divest from South Africa in the late 1970s. The Minnesota Legislature introduced a divestment bill in 1982, but the bill was defeated.
Mattson was one of the earliest advocates of divestment among state leaders: In a 1985 letter, he reminded Perpich and Humphrey that divestment was part of their 1984 Democratic primary platform and urged them to support it.
Mattson primarily argued that investing in companies that supported the apartheid system was morally unacceptable, while Groh proposed a divestment framework that expressed Minnesota’s “moral indignation” toward the South African regime.
In a September 1985 statement, Humphrey said apartheid was “morally abhorrent. There is no question that divestment is the appropriate national response,” adding that he supported a strategy to minimise disinvestment.
According to notes in Carlson’s file held at the State Archives, Humphrey recognised the financial risks in both exiting and maintaining the investment in South Africa.
Carlson, the only Republican on the investment committee at the time, staunchly opposed even forming a task force to study the issue, arguing that divestment would lead to lower returns on pension investments.
Mattson countered that the growing divestment movement and instability in South Africa and Namibia would reduce the value of these investments.
Contacted this month, Carlsson said he did not remember the details of the discussions about South Africa but said he remained of the opinion that maximizing profits should be the sole guide to investment decisions.
While the debate began with the moral aspect of divestment, the resolution passed by the State Investment Commission ultimately combined both ethical and fiduciary reasons for divestment.
The resolution combined both reasons, saying the apartheid systems of South Africa and neighbouring Namibia were “morally repugnant to all who believe in the inherent right of individual liberty” and that the apartheid system “raises doubts about the safety and stability of investments for companies operating in the two countries.”
Having trouble viewing a document? click here.
