Terror Investments of the 50 States

"Terrorism Investments of the 50 States" is the first national security-based statistical analysis of the investment patterns of America’s public pension funds.  This report proves empirically that this nation’s largest and most prominent public pension systems tend to be heavily invested in global publicly traded companies that have business activities in terrorist-sponsoring states.1

Together, these funds invest over $1 trillion in stock alone2 on behalf of this country’s fire fighters, police officers, teachers, state and local officials and other public employees, making this collection of funds one of the most powerful investment blocks in the world.  Given this extraordinary financial influence and the important role played by public companies in the economies of terrorist-sponsoring states3,the Center for Security Policy has reached a key finding: America’s 100 largest and most prominent pension systems have the power to help defeat terrorism. 

From the pension system of this country’s smallest state, Rhode Island, which has close to $400 million invested in 41 companies that are active in terrorist-sponsoring states, to America’s largest public pension system — the California Public Employees Retirement System — which has over $17 billion invested in 201 such companies, the results were remarkably uniform:

On average, America’s Top 100 pension systems invest between 15 and 23 percent of their portfolio in companies that do business in terrorist-sponsoring states.4

Among the report’s other important findings:

• 39 of the Top 100 pension systems were found to be invested in more than 100 companies with corporate ties to terrorist-sponsoring states.  Of the rest for which there is data, only five hold less than 30 companies with such ties in portfolio.

• On average, the Top 100 pension systems invest in 101 companies that have business activities in terrorist sponsoring states.  These companies, in turn, are involved in projects in terrorist-sponsoring states valued at more than $73 billion.5

• On average, the Top 100 public funds were invested in: 73 companies doing business in Iran; 24 companies doing business in Libya; 26 companies doing business in Sudan; 31 companies doing business in Syria; and 9 companies doing business in North Korea.

• On average, the Top 100 pension systems were invested in 17 companies that did business with Saddam Hussein’s Iraq prior to the war.

From the fact that virtually each and every public employee in this country holds stock in companies that partner with governments that sponsor terrorism flows an extraordinary opportunity: America’s 100 largest and most influential pension systems have the power to help defeat terrorism.  To understand why requires only one further statistic:  The total estimated value of the stock of some 400 companies doing business in terrorist sponsoring states held by America’s leading public pension systems is approximately $188 billion.6

When a group of investors own roughly $200 billion worth of stock in some 400 companies, they should be able to exercise considerable influence over the decision-making and business activities of those companies.  Accordingly, if these Top 100 pension systems were to make clear that their funds will not be available to corporations partnering with terrorist-sponsoring states, the message would be unmistakable:  There will no longer be simply profits to be garnered from investments in rogue states; from now on, there will be real costs.  Ideally, those costs will translate into a choice between doing business with the American people and capital markets on the one hand or, alternatively, doing business with terrorists’ friends and this country’s enemies. 

The South Africa divestment campaign of the 1980’s taught Americans a compelling lesson:  When companies receive a unified message from state pension systems and other institutional investors who follow their lead, they respond.  It seems reasonable to expect that, just as such corporate actions (notably, withdrawal from business operations in-country) compelled changes in the policies — and ultimately the government — of South Africa, application of this model to state-sponsors of terror could also produce salutary results.  In other words, the Top 100 public pension systems can help defeat terrorism by using their investments in public companies to force the governments of Iran, Syria, North Korea, Sudan and Libya to choose between their sponsorship of terrorism and their critical partnerships with public companies.

In a recent letter to the Executive Directors of the same Top 100 pension systems assessed herein, Senator Frank Lautenberg (D-NJ) left little doubt as to the moral responsibility of our nation’s pension systems to help defeat terrorism.  According to the Senator, "It is uncon-scionable for our country’s public pension systems to permit investment in companies that provide revenues, advanced equipment and technology to countries that threaten our vital security interests."

The data in this report establishes that such "unconscionable" behavior is pervasively occurring today.  For Americans to understand the full extent to which their money is being used by publicly traded companies to help terrorist-sponsoring regimes, they will need greater transparency and disclosure on the part of those who manage and invest such funds.  Toward that end, public employees, taxpayers and state and federal officials and legislators should insist on knowing the full extent of their unintended and undesirable exposure — moral, strategic and financial — to aiding and abetting our enemies.

In the meantime, a simple principle must be applied:  Americans do not want to invest in terror, directly or indirectly.  Regrettably, that is what is being done on a massive scale today.  Stopping such a practice — the goal of DivestTerror.org — can make a significant contribution to waging and winning the war on terror.

This report sought to analyze America’s "Top 100" largest and most prominent public pension systems, excluding public university endowments.  At the time of publication, only 87 of these public pension funds had provided the data required to undertake this analysis. 

America’s Top 100 funds invest via a number of other investment vehicles, making their total investments on behalf of the American people closer to $2 trillion.

For the purposes of this report, terrorist-sponsoring states are defined as Iran, Saddam Hussein’s Iraq, Libya, North Korea, Sudan and Syria.  Although Cuba is also correctly listed as a state-sponsor of terrorism by the U.S. Department of State, relevant data for Cuba was not available for this study.

To perform the analyses of the 100 pension systems’ investment portfolios, the Center forwarded this data to the Conflict Securities Advisory Group (CSAG).  Using their Global Security Risk Monitor, CSAG ran each portfolio to determine its exposure to companies doing business in terrorist-sponsoring states or to proliferation-related concerns.  The Center’s use of this data and the views and policy recommendations expressed in this report do not necessarily reflect those of CSAG or its partner firm, Investor Responsibility Research Center.

Of the roughly 400 companies considered in this report, project values and similar financial data was available for only some 150 companies.  A reasonable estimate of the value of all 400 companies’ projects in terrorist-sponsoring countries would be well over $100 billion. 

Based on the results for the 87 funds analyzed, we estimate that the actual holdings of the Top 100 pension systems in the stock of companies that do business in terrorist-sponsoring states likely exceeds $210 billion.

View the full report (PDF)

footnotes:

1. This report sought to analyze America’s "Top 100" largest and most prominent public pension systems, excluding public university endowments.  At the time of publication, only 87 of these public pension funds had provided the data required to undertake this analysis. 

2. America’s Top 100 funds invest via a number of other investment vehicles, making their total investments on behalf of the American people closer to $2 trillion.

3. For the purposes of this report, terrorist-sponsoring states are defined as Iran, Saddam Hussein’s Iraq, Libya, North Korea, Sudan and Syria.  Although Cuba is also correctly listed as a state-sponsor of terrorism by the U.S. Department of State, relevant data for Cuba was not available for this study.

4. To perform the analyses of the 100 pension systems’ investment portfolios, the Center forwarded this data to the Conflict Securities Advisory Group (CSAG).  Using their Global Security Risk Monitor, CSAG ran each portfolio to determine its exposure to companies doing business in terrorist-sponsoring states or to proliferation-related concerns.  The Center’s use of this data and the views and policy recommendations expressed in this report do not necessarily reflect those of CSAG or its partner firm, Investor Responsibility Research Center.

5. Of the roughly 400 companies considered in this report, project values and similar financial data was available for only some 150 companies.  A reasonable estimate of the value of all 400 companies’ projects in terrorist-sponsoring countries would be well over $100 billion. 

6.Based on the results for the 87 funds analyzed, we estimate that the actual holdings of the Top 100 pension systems in the stock of companies that do business in terrorist-sponsoring states likely exceeds $210 billion.