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Before deciding on a final list of financial service providers that discriminate against energy and fossil fuel companies, the State of Arkansas’ ESG Oversight Committee will review the financial implications of the potential sale of certain investments in the state’s retirement system under state law. Committee chairman David said the impact could not be taken into account. Scott said Monday.
The commission voted Thursday that six financial services providers that do business with the state government discriminate against energy and fossil fuel companies.
The six financial services providers will receive written notification of the commission’s findings and will have 30 days from receipt of the notification to certify that they do not discriminate against energy or fossil fuel companies. Scott said written notices to the six service providers will be sent by certified mail today.
The commission announced Monday that the six financial services providers have provided sufficient information to the commission to show that they do not discriminate against energy or fossil fuel companies. It was decided to hold a meeting on the 6th. At that meeting, the committee is expected to give final approval to the list.
The Committee also on Monday clarified which entities are among the three financial services providers that the Committee determined Thursday discriminated based on public statements in company reports. It was resolved.
The three financial services providers include UBS Group AG, UBS Asset Management, UBS Securities LLC, and UBS Financial Services Inc. Credit Suisse Asset Management, Credit Suisse Group AG, Credit Suisse Securities LLC. Royal Bank of Canada, Royal Bank of Canada Global Asset Management, and RBC Capital Markets.
The commission last week found three other financial services providers discriminated against energy and fossil fuel companies. These include Goldman Sachs Asset Management, Goldman Sachs & Co., and Goldman Sachs Group Inc. TD Asset Management, TD Bank Group, TD Securities. Nomura Asset Management, Nomura Group, Nomura Securities.
All six financial providers do business with the Treasury. UBS does business with the Arkansas Teachers Retirement System. Goldman Sachs does business with the Arkansas Police and Fire Retirement System, state officials said.
The Arkansas Teachers Retirement System is invested in three funds managed by UBS. These include the UBS Trumbull Real Estate Fund, which has a current value of approximately $125.5 million, the UBS Agrivest Core Farmland Fund, which has a current value of approximately $62 million, and UBS Trumbull Real Estate Income. The current value of the fund is about $52.5 million, System Deputy Director Rod Graves said last week.
The Arkansas Rural Police and Fire Retirement System invested in the 2016 Goldman Sachs Vintage VII Private Equity Secondary Fund. The fund’s current market value is $10.1 million as of December 31st. The fund buys secondary interests in limited partnerships, and Larry Middleton, the system’s investment consultant and executive vice president at Stevens, said Thursday about the process of returning funds to investors as part of the distribution process. revealed.
At Monday’s ESG Oversight Committee meeting, Commissioner Steve Cook asked officials from the Arkansas Teachers’ Retirement System and the Arkansas Rural Police and Fire Retirement System to “speak with the committee to inform them of any future impacts.” I want to give them a chance.” When these investment managers withdraw from these two entities, both systems incur costs.
“I have heard public testimony that the system believed it was in compliance with Act 411,” Cook said, adding that the system invested in funds from investment managers that discriminated against energy, fossil fuel, firearms and ammunition companies. He said that he had not done so.
Mr. Cook said he wanted to give the two retirement plans the opportunity to “state, if they wish, why these companies should or should not remain in their portfolios.”
Scott does not disagree with Cooke’s ideas, but said that considering the financial impact on the state’s retirement system under Act 411 of 2023 is an ESG Oversight Committee’s “statutory obligation in practice. is irrelevant,” he said, adding that the committee cannot take advantage of it. Information as a decision-making tool.
Commissioner Tom Lundstrom also said the financial impact of the ESG Oversight Board’s decisions on state retirement systems appears to be outside the commission’s authority under Act 411.
State agency Deputy Attorney General Doralee Chandler said financial impact information is not evidence the commission can use in determining the final list of financial service providers that discriminate under Act 411 of 2023. said. However, he said information on the financial impact could be provided to the committee after it has decided on the final list.
Potential risks to the Arkansas Police and Fire Retirement System if it is forced to sell its investment in Goldman Sachs funds after Monday’s ESG Oversight Committee meeting Asked about the financial impact, system director David Clark said Monday that “LOPFI has not completed any such calculations.” . ”
Information about the potential financial impact on the Arkansas Teachers Retirement System if it is forced to sell its investment in the UBS fund was not available through system officials Monday afternoon.
The Arkansas Highway Employees Retirement System has one $1 million bond issued by Goldman Sachs, Robin Smith, the system’s executive director, said after the committee meeting. .
Asked whether retirement plans could continue to do business with Goldman Sachs under Act 411 if it was on the ESG committee’s final list, Smith said in a written statement that the company was “insensitive.” He said he had no intention of doing so.
“This is a very complex piece of legislation,” she said. “Once the list is complete, we will need to review all of our holdings and relationships to determine the extent, if any, of our connections to the companies on the list. At that point, we will need to discuss this with our legal representatives. Yes, such connections are prohibited.”
“I can confirm that we have not made any investments in these,” Amy Fesher, executive director of the Arkansas Public Employees’ Retirement System, said after the committee meeting. [six] “Companies that the Commission determines discriminate against energy and fossil fuel companies.”
The Treasury uses Credit Suisse, Nomura, RBC, Goldman Sachs, TD Securities, and UBS as broker-dealers to buy and sell debt securities, including U.S. Treasury securities, U.S. government agency securities, and mortgage-backed securities. State Treasury Department spokeswoman Heather McKim said Thursday of the department’s portfolio.
McKim said the Treasury has its own investment management team that decides which securities to buy and sell, and that the Treasury’s portfolio securities are held at its custodian, the Bank of New York Mellon. He said the state Treasury Board has authorized certain broker-dealers to provide investment services traded by the state treasury.
Mr. McKim said Treasury’s investment practices prioritize three key objectives: safety, liquidity and return on investment, and these objectives guide the decision-making process.
By mid-May, the ESG Oversight Committee will compile a list of financial services providers that discriminate against energy, fossil fuel, and firearms and ammunition companies or refuse to do business with them on grounds such as the environment or social justice. It is mandatory to provide the information to the organization. Governance-related factors under Act 411 of 2023. The State Treasurer must maintain the list determined by the ESG Oversight Committee on her State Treasurer’s website.
State Treasurers, as well as state and local governments, are required under the law to sell their direct or indirect holdings with financial service providers included on the list. Submitting the list to the State Treasurer automatically terminates the commission under her Act 411 of 2023.
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