Connecticut’s pension fund investment portfolio generated significant scrutiny earlier this year after a Yale study concluded it had one of the worst returns of all 50 states.
Among the findings was that Connecticut has overinvested in emerging market equities. I would posit a related problem with our pension strategy: overinvestment in dictatorships.
It has long struck me as absurd that socially responsible investing generally does not take into account whether a country is a democracy. While there are laudable efforts to divest from fossil fuel companies and gun manufacturers, it seems to me that shunning autocracies should be even more fundamental.
At best, we’ve seen one-off efforts to divest from a human rights abuser or conflict zone du jour, but not a comprehensive policy. Indeed, Connecticut already has a patchwork of laws on the books allowing the treasurer to divest from Sudan, Iran and Northern Ireland.
When I ran for the General Assembly last year, I published a foreign policy platform (as I also did in 2018). While it may sound strange for a potential state legislator to opine on international affairs, to me it is inseparable from good public policy. One of my proposals was to divest state pension funds from authoritarian regimes, especially China and Russia.
This tragically came into play a little over a month after I announced my candidacy, when Russia launched its full-scale invasion of Ukraine. Connecticut, along with dozens of other states, announced it would be divesting from Russian companies. But by then it was too late. From a narrow financial perspective, the value of Russian assets sank to practically nothing, and the Kremlin further restricted any ability to enact divestment plans. Even more important, though, was the fact that Western trade and investment had nurtured Putin’s Russia for over two decades, enabling Moscow to build up its military and police state.
As if we needed to learn this lesson yet again, waiting until a crisis hits is an utterly futile strategy: the very definition of too little too late. Are we to wait until China invades Taiwan to realize that doing business with the world’s largest dictatorship was a grievous mistake? Did we really need the murder of Jamal Khashoggi to remind us that Saudi Arabia is an absolute monarchy (and even that didn’t keep investors away for long)?
It is a moral and financial imperative for Connecticut to divest from dictatorships. We hear a lot of cheap talk in this state about democracy; here’s an opportunity to put our money where our mouth is. We can set an example for other state and national pension funds, progressively reducing the free world’s complicity in repressive regimes and degrading their ability to inflict harm in the first place.
Andy Gottlieb is a Democrat from Guilford and was a candidate for the General Assembly in 2018 and 2022.