A $300 million slice of Florida’s nearly $200 billion public pension portfolio is invested in Russian companies, even as the pariah nation faces mounting accusations of genocide and other war crimes in Ukraine.
Democrats want Florida to divest that tiny part of the fund, arguing the state’s leaders should act swiftly to dump Russian investments. Florida’s holdings include Russian oil producers, mining companies and the country’s largest bank, according to a review from late January.
Florida’s chief investment officer says the state’s hands are tied because Russia has blocked foreigners from markets, and leaders are taking a “deliberative approach.”
Officials in 25 states have issued orders to divest any Russian-held investments or examine Russian investments, according to Stateside, a government consulting firm that tracks legislation. Lawmakers in at least 19 states have introduced legislation to divest.
While Florida has not moved to divest, lawmakers did order a review of state contracts to check for any taxpayer dollars that could be going to Russia-based businesses. The findings must be reported to the Legislature by Dec 1.
Q: Why is Florida investing in Russia?
Sean Snaith, an economist at the University of Central Florida, said it’s “standard operating procedure” for large public pension funds to invest in “emerging markets” as a way to diversify, which includes investments in Russia before the war.
”It is a pretty small percentage overall,” Snaith said. “Just as mutual funds or pension funds will diversify across a sector of the economy within a given country, they also diversify across countries. It is a way of mitigating country-specific risks. It is a fairly common practice.”
The State Board of Administration, which is in charge of the state’s retirement funds, has about $300 million in Russian investments out of $195 billion in assets, Dennis MacKee, the board’s spokesman, said shortly after the war started in late February.
The value of those investments has likely declined significantly with U.S. and international sanctions battering Russia’s economy.
MacKee did not have an estimate of what the Russian investments are worth now.
Q: Can Florida divest?
Severing Florida’s financial ties with Russia is complex, Snaith said.
Russia’s stock market has reopened, but foreigners are banned from selling shares. Pension managers are “unable to liquidate even if they wanted to,” Snaith said.
Lamar Taylor, the State Board of Administration’s interim executive director and chief investment officer, said at a Florida Cabinet meeting on March 29 that Russia’s equity markets have been shut to foreign investors since Feb. 25.
“If we were forced to divest today ... even if we could ... the only thing that would do would be to ensure a realized loss for the Florida Retirement System defined benefit pension plan,” Taylor said. “That is an outcome that we are seeking to mitigate by taking a more deliberative approach and making sure that our managers are acting as a fiduciary in the best economic interests of the plan.”
Taylor said his agency is complying with all U.S. sanctions.
The State Board of Administration is overseen by three trustees elected by Florida voters: Gov. Ron DeSantis, Chief Financial Officer Jimmy Patronis and Attorney General Ashley Moody.
During the Cabinet meeting, DeSantis asked Taylor if it would violate the state Board of Administration’s fiduciary duties “if you liquidated at massive losses for political reasons, rather than for the best interest of the beneficiaries.”
Taylor said it would.
DeSantis suggested the Legislature may act to provide policy direction to avoid investing in countries hostile to U.S. interests when state Rep. Paul Renner becomes House speaker after the November elections.
Q: What are Democrats saying?
Democrats running for governor say Florida should act more urgently to punish Russian President Vladimir Putin by at least attempting to pull the state’s investments.
“Unfortunately, we have a governor who was slow to react to the invasion, slow to condemn Putin and has been very soft on Russia,” said Nikki Fried, the state’s agriculture commissioner and only statewide-elected Democrat.
She added, “Florida has a responsibility to the people of our state to stand in solidarity with the fight for a Democracy.”
U.S. Rep. Charlie Crist and state Sen. Annette Taddeo, two other Democrats running for governor, have also called for Florida to divest.
Fried said she thinks DeSantis does have the authority to act and could be more vocal, citing the state’s stance on China.
In December, DeSantis and other Republican leaders ordered an audit of the state’s investments in China that could lead to divestment. In a news release, DeSantis said the “Communist Party of China is not a vehicle that we want to be entangled with.”
Florida lawmakers will meet for a special legislative session from April 19-22, but the state’s Russian investments are not on the agenda.
Q: What are Florida’s Russian holdings?
Here are Florida’s holdings that “represented the vast majority of the exposure to Russian investments at the end of January,” according to the State Board of Administration.
— Sberbank, majority state-owned banking and financial services company headquartered in Moscow
— Lukoil, one of Russia’s largest energy producers
— Nornickel, one of the world’s largest producers of nickel and palladium and a major producer of copper and platinum
— Polymetal International, a top-10 global gold producer and top-five global silver producer
— Rosneft, a state-controlled oil giant
— Magnit, one of Russia’s largest grocery chains
— HeadHunter, an online job recruitment platform
— Ozon, an e-commerce platform
— Novolipetsk Steel, one of Russia’s largest steel producers
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