SENATE, No. 1437

SECTION 1. Chapter 32 section 2A of the General Laws is hereby amended by adding the following new subsection (k)

( a) The assets of any pension or annuity fund under the jurisdiction of the treasurer and receiver general of the commonwealth shall not be invested in companies (“targeted companies”) which either directly or through an affiliated instrumentality meet the following criteria:

            i)  Provide revenues to the Sudanese government through business with the government, government-owned companies or government-controlled consortiums.

            ii) Offer little substantive benefit to those outside of the Sudanese government or its affiliated supporters in Khartoum, Northern Sudan and the Nile River Valley; this “outside” population specifically includes the country’s disaffected Eastern, Southern, and Western regions.

            iii) Have either demonstrated complicity in the Darfur genocide or have not taken any substantial action to halt the genocide. Substantial action shall include but is not limited to curtailment of operations or public pressure on the Sudanese government. Simple company statements shall not constitute evidence of substantial action.

(b) Companies providing military equipment, arms, or defense supplies to any domestic party in Sudan , including the Sudanese government and rebels, shall automatically be targeted for divestment. A strong presumption shall also be made against any company providing any domestic party in Sudan with equipment that may be readily co-opted for military use, including radar systems and military-grade transport vehicles, unless that company has implemented safeguards against such co-option.

(c) Companies which, either directly or through an affiliated instrumentality, provide services clearly dedicated to social development for the whole country shall be excluded from divestment. Such entities include, but are not limited to those providing medicine and medical equipment, agricultural supplies and agricultural infrastructure, educational opportunities, journalism-related activities, and general consumer goods.

(d) Companies whose operations in Sudan are dormant but who do have an equity share in or with the country shall be engaged in an ongoing dialogue of concern with the fiduciaries. Such companies shall not be targeted for divestment until such time as their operations become active and they fulfill the criteria in subsections (a)-(c).

(e) The following types of investments shall be subject to divestment:

            i)  Direct holdings of public equity, corporate bonds, and Sudanese government-issued bonds.

                        a.      Direct investments shall be defined as holdings directly managed by the fiduciaries mentioned in this bill and all holdings administered by a contracted manager in separately managed accounts, including both actively-managed and passively- managed/indexed funds.

            ii) Holdings of public equity, corporate bonds, and Sudanese-government-issued bonds in commingled accounts that are passively-managed/indexed. Actively-managed, commingled accounts, for both public equity and qualified fixed-income investments, will be excluded from immediate divestment. Such accounts are still covered under section 1f of this bill.

            iii) Private equity holdings with readily identifiable ties to Sudan

                        a.      “Readily identifiable” is left to the good faith judgment of the fiduciaries mentioned in this bill.

(f) The Treasurer, or his designates, shall submit letters to contracted managers of actively-managed, commingled accounts requesting that the manager consider creating an actively-managed, commingled account devoid of companies targeted as a result of this bill. In the event of such an introduction, the fiduciaries shall transfer all assets in actively-managed, commingled accounts into the newly available, Sudan-free accounts in an expedited timeframe still consistent with the fiduciaries’ prudent investor obligations.

(g) The list of targeted companies shall be determined by submitting the criteria in section 1a-d to a reputable and non-biased third-party research firm, such as, but not limited to, the Institutional Shareholder Services, Inc. or KLD Research & Analytics. Such a list may require modifications as circumstances in Sudan evolve.

(h) Research attained through the process outlined in section 1g must, when possible, be supplemented by publicly available research, communication with potentially targeted companies, and communication with states and institutions that have already divested.

(i) Reasons for eliminating or adding a company to a preliminary list of identified companies based on the process outlined in section 1g must be justified in writing and supported by available research.

(j) The treasurer or his designates, shall take appropriate action to sell, redeem, divest or withdraw any investment held in violation of this act within one year of the effective date of the act.

(k) Annually the treasurer shall report on all investments sold, redeemed, divested or withdrawn in compliance with this section as well as any companies that the fiduciary is engaged with under subsection (d).

(l) If it is determined by the treasurer or his designates, that a company, which had previously been a targeted company, has ceased business operations with Sudan or its instrumentalities, then subsection (j) shall no longer apply to that company. Reasons for addition or subtraction of a company from divestment or engagement shall be made clear in the report described in subsection (k).

(m) In the event that the government of Sudan sufficiently halts the ongoing genocide in Darfur for at least 12 months, as determined jointly by the State Department and Congress of the United States , the provisions of this bill shall expire.

(n) In the event that the United States revokes its current sanctions on the Sudan , the provisions of this bill shall expire.

SECTION 2.   Nothing in this act shall alter or diminish existing fiduciary or statutory obligations and other terms, conditions, and limitations on the investment of retirement system assets for the exclusive interest and benefit of participants and beneficiaries of a retirement system.