The Lothian Pension Fund has admitted its investments in Sberbank and VK Group are “worthless” following Russia's invasion of Ukraine.
The pension scheme for public sector workers from Edinburgh, East and West Lothian still owns shares in Russia’s largest bank, which has been sanctioned by the EU, US and UK.
As of 30 September 2021, the investment fund held 95,213 shares in Sberbank, valued around £1.3m.
It also owned shares in Prosus, which has a 27% stake in Russia’s VK Group, which owns Russian social media site VK VKontakte.
VK Group’s chief executive Vladimir Kiriyenko was sanctioned by the US for his links to the Kremlin.
Kiriyenko is the son of Vladimir Putin’s first deputy chief of staff Sergei Kiriyenko, who the US has described as the president's “domestic policy curator”.
The Lothian Pension Fund owned 152, 496 shares, valued around £9m at the time. It said this is still a "minimal exposure", valued at 0.01% of the fund's assets.
The fund has also a portfolio in China, with direct investments in firms that have been ensnared in money laundering investigations
The Industrial and Commercial Bank China was found guilty of money laundering in 2020 by Spain’s top court, which saw four former employees and executives imprisoned up to five months after reaching a plea deal, with the bank being forced to pay €22.7m.
It owns 38.8m shares, which were valued at around £15.8m at the time.
Meanwhile, China Minsheng Banking was fined 23.6 million yuan for failing in its anti-money laundering procedures. The pension fund owns 11.9 million shares, which were worth £3.5m at the time the document was produced.
China Life Insurance’s chairman is currently under investigation by China’s anti-corruption watchdog. The fund owns 1.3 million shares, valued around £1m.
It also has shares in China Construction Bank, which was fined in 2020 and 2021 for anti-money laundering breaches. The fund owns 27.8 million shares which are valued around £14.7m.
A spokeswoman responded: “Lothian Pension Fund owns a diversified portfolio of assets with minimal exposure to Russian and Ukrainian securities.
“Prior to the Russian invasion of Ukraine, the fund held two Russian securities [Sberbank and VK] which were valued at around 0.01% of the fund’s assets - we’ve reviewed these post-invasions and assume that they are worthless at this point in time.
“Our thoughts are with the millions of people affected by this tragic turn of events that will inevitably have a large human cost.
“In these difficult times our members expect us to remain level-headed and keep focused on making the best investment decisions we can, while continuing to assess the geopolitical risks, changing market implications and the potential impact on portfolios as the situation unfolds.”
The statement added that the fund has a “transparent approach” to investment management and publishes updates to its environmental, social and governance strategy regularly.
Scottish Liberal Democrat economy spokesperson Willie Rennie said: "This will be devastating news for workers and pensioners with funds invested in the Lothian Pension Fund.
"Once it became obvious that Putin was intent on invading Ukraine, the sensible thing would have been to sell these shares and look for alternative investments.
"Scotland needs to play its part in putting the squeeze on the Putin regime."
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