Twenty years ago, New York City joined many local governments and companies in divesting half a billion dollars from apartheid South Africa. Over the last few years, several top city officials have been talking divestment again, eager to get pension money out of Sudan, Iran and North Korea.

And last month, President George W. Bush gave his blessing to local efforts, signing a law which authorizes state and local governments to cut investment ties with companies doing business with Sudan, even while arguing that the bill could interfere with his own right to set foreign policy.

But New York City divestment still seems unlikely to happen so long as City Comptroller William Thompson (D) controls the pension funds.

Thompson has been heavily involved in confronting international companies about their business ties to countries like Sudan, Iran and North Korea. Though he said he is committed to leveraging the pension funds’ power to address the humanitarian crises in these countries, for Thompson, selling off the funds’ investments in these companies is a step too far.

Rather than divest, Thompson has adopted a strategy of engagement with companies.

Thompson gained national attention for his appeals to companies with ties to Iran to change their business practices, and in the years since, has prompted Halliburton, Aon Corporation, Cooper Cameron, ConocoPhillips, Foster Wheeler and General Electric to consider cutting their business ties with the nation. His office hopes to duplicate these efforts in Sudan, and throughout last year, sent letters to a dozen companies urging them to cease all business in Sudan and to provide aid to refugees in that war-torn country.

“In everything we do—in our shareholder resolution, in our communications—we look to generate things that are good for the bottom line and maintain our fiduciary responsibility,” Thompson said. “We never divest.”

He claimed his alternative strategy was more effective.

“Companies [with ties to] Sudan, Iran and others, I think you'll see we’ve reached out to a number of them because we believe, in the long-term, some of the work they are doing is detrimental to the bottom line,” he said.

Thompson is the custodian of the five city pension funds, which together hold almost $1 billion worth of shares in a dozen companies with ties to Sudan.  

Over the past year, the comptroller’s office has vigorously pursued these companies about their overseas activities, to little tangible result. In a letter last June, Thompson urged PetroChina to fully disclose specific actions taken to provide relief to Darfur, where the state-owned Chinese oil company has numerous financial holdings.

The Nov. 9 deadline for disclosure, which Thompson set in his letter, came and went without any response from PetroChina. The comptroller’s office was unable to provide information on responses to letters sent to more than two dozen other companies.

Thompson’s engagement-over-divestment stance is in direct conflict with the City Council, which is reportedly close to passing a resolution calling for targeted divestments from corporations doing business with Sudan.

Council Member Eric Gioia (D-Queens), who co-sponsored the resolution, said that divestment is a way for the city to intervene substantively in an international humanitarian crisis.

Gioia said he has had discussions with Thompson and Finance Commissioner Martha Stark about outlining a divestment strategy.

“I think that divestment has to be used rarely and should be taken seriously,” he said. “But for constructive engagement to have teeth, divestment has to be a real option.”

Council Member David Yassky (D-Brooklyn) said the non-binding resolution should be the first step in a multi-pronged approach.

“The real goal is to get a meaningful divestiture plan,” said Yassky.

Yassky is campaigning to succeed Thompson, who is term-limited out next year, and he said he would bring a different approach to divestment if elected.  

“I would certainly pursue this issue vigorously as comptroller,” he said.  

Thompson has not discussed his opposition to divestment much. But he laid out his case against withdrawing funds in a little-noticed article published last March in Compact Quarterly, a limited-circulation global investment publication put out by the United Nations.

“Undoubtedly, divestment proponents are sincere,” Thompson wrote in the piece. “However, divestment will not help to address the urgent humanitarian crisis.”

Thompson called the divestment comparison between Sudan and South Africa false:  state and local divestments to end apartheid kick-started a broader effort to confront the South African government, whereas the movement to intervene in Sudan already exists.

Meanwhile, New York State is already six months into its divestment plan. Last June, State Comptroller Thomas DiNapoli (D) announced a three-phase plan to identify companies with risky investments, encourage those corporations to provide humanitarian aid and develop divestment strategies from those companies that have failed to adequately respond.                      

While the state has yet to divest any of its pension holdings, DiNapoli’s plan, unlike Thompson’s, keeps divestment on the table.
An analysis by State Sen. Jeff Klein (D-Bronx/Westchester) found that over $12 billion of state pension dollars are invested in companies that do business with one or all of the nations on the State Department’s watch list.

But DiNapoli’s office says that Klein’s figures are inaccurate.

“In that context, $12 billion does not accurately reflect our holding, or the Common Retirement Fund’s holding, in Sudan and companies in Iran’s energy and defense sectors,” said Robert Whalen, a DiNapoli spokesman.

Klein, who joined with mayoral contender Rep. Anthony Weiner (D-Brooklyn/Queens) last year to call for pension divestments, said New York is in the unique position to lead by virtue of having the second largest pension fund in the country.

“I don’t want to see the state pension fund lose money by divesting prematurely,” Klein said. “But I still think you can influence companies as a major shareholder.”

John Tepper Marlin, who before becoming a consultant at CityEconomist served as chief economist and senior policy adviser to Thompson and two previous city comptrollers, said divestment is mainly a tool wielded by politicians to shore up their progressive constituencies more than anything else.

“This is something that has a large upside for the political people looking for votes, either among the union members or the electorate at large. And there’s no downside, because the people you’re going to alienate are not nearby,” Marlin said. “They’re not local.”

Keith Brainard, research director at the National Association of State Retirement Administrators, was more critical, asserting that divestment is purely symbolic.

“If people think they’re going to affect a company by requiring a pension fund to divest its holdings, they don’t understand financial markets,” Brainard said.

Even more problematic, he said, is the risk of lower returns for pension beneficiaries and retirees.

That is not how the Sudan Divestment Taskforce sees things. The Washington-based group is collaborating with DiNapoli on his divestment strategy and is currently in talks with Thompson’s office in the hopes of changing his mind on divestment.

“We’re very serious about actually negotiating with the companies to come up with ways that they can make sure their operations are not contributing to the Darfur genocide,” said Daniel Millenson, the taskforce’s national advocacy director.

Millenson cites as an example the Canadian mining corporation, La Mancha Resources, whichrefrained from making a multi-million dollar investment in expanding its gold mine in the eastern part of Sudan because of the threat of municipal divestment if it proceeded. Ultimately, the company not only canceled these plans, but took the active role of allowing U.N. peacekeepers access to its property in the country.

“That’s not symbolic,” said Millenson. “That’s effective.”