In the grand scheme of things, Alaska’s investments in Russian assets are pretty small.
Those investments — once an estimated $333 million worth of Russian stocks, bonds and private equity — represent just .3 percent of Alaska's overall holdings. As of last Monday, those assets were devalued to about $18 million amid the dismal financial situation in Russia, according to Lucinda Mahoney, commissioner of the state’s department of revenue.
Still, the governor and a growing chorus of lawmakers say divestment could add to the pressure on Moscow as it continues to attack Ukraine.
“I’m not deluding myself into thinking that these actions will bring this war to an end,” Gov. Mike Dunleavy said at a press conference earlier this week. “But again, if we do it, other states do it, other governments do it. It starts to cut off support, I believe, for the Putin administration.”
Divesting is selling or dumping assets — essentially, the opposite of investing.
Alaska’s assets can be divided into several buckets. There’s the Permanent Fund, managed by the Alaska Permanent Fund Corporation. The state’s Department of Revenue also manages a pension fund and an assortment of other state funds.
The Alaska Permanent Fund Corporation in particular says it doesn’t divest due to social or political pressure. But this week, as over two dozen other states considered divesting their Russian assets and the U.S. announced its ban on Russian oil, lawmakers in Alaska also considered what divesting the fund and others could and should look like.
Sitka Democrat Rep. Jonathan Kreiss-Tomkins chairs the state affairs committee, which heard a bill to divest Thursday. He said divestment has an impact when it’s done on a large scal
“In the instance with Russia, where you have more or less the entire free world embargoing Russia, divesting from Russia — not only does their cost of capital increase, they just don’t have access to capital, period,” he said.
That bill, House Bill 396, would prohibit fund managers from investing in “publicly traded securities of Russian entities.” It makes an exception for comingled investments, or singular funds made up from multiple investors. The state affairs committee will continue hearings on that bill next week.
That bill would extend to all state funds. Mahoney said Dunleavy plans to introduce his own divestment bill that would be much less far-reaching.
She said that bill will not include the permanent fund or retirement fund. Instead, it will be the remaining $7 billion in funds managed by the Department of Revenue.
"With the $7 billon, it wasn’t that significant of an impact. But it was sending a message that the governor supports some sort of divestiture from Russian investments," Mahoney said.
She said that’s because the governor wants to make sure he’s not compromising returns. That is how Alaska has justified not setting any environmental and social governance policies for its investments in the past. Investors elsewhere have used so-called ESG policies to justify divesting in fossil fuels, for example.
Instead, state fund managers operate on a prudent investor rule, Mahoney explained, meaning investors make decisions based on what would be best for the state financially.
She said at the hearing trustees for the Permanent Fund Corporation might prefer to let the investments go through the normal risk management process.
“I would venture to say the majority of the trustees would likely suggest to hold in anticipation of a recovery," she said. "But that would be votes that would need to be taken at each of those board meetings.”
A move to divest would have to come from the legislature, since fund managers are not allowed to act on any social justification.
And managers of the permanent fund say they’ve never acted on calls for divestment before. Attempts to divest funds from Sudan in 2009 and Iran in 2011 both failed. The corporation has been resistant to the prospect of divesting this time around, too.
But the Alaska Permanent Fund Corporation saidin a statement Thursday that this is different. The letter say the state-owned corporation has directed managers not to purchase Russian assets and is considering what to do with the assets it has now.
Meantime, the bills in the legislature will get more hearing this week.
