Developments in the Sudan divestment movement, approximately a year and half old now, continue to gain momentum, particularly in the last several months. This trend is due in large part to the success that the Sudan Divestment Task Force (SDTF), the primary Sudan divestment advocacy group, has had in getting divestment legislation passed. In April, Colorado and Iowa passed Sudan divestment legislation based on the SDTF model, followed by Kansas, Minnesota and Indiana in May, and Florida, Texas and Hawaii in June. These states join California and Vermont, both of which previously passed divestment legislation based on the SDTF model. Not waiting for legislative action, New York State Comptroller, Thomas DiNapoli, announced on June 11th, 2007, that the New York State Common Retirement Fund would implement an investment policy, also consistent with the SDTF model, that would apply to companies with business ties to Sudan.

Other states that have enacted legislation addressing Sudan and the investment of state retirement funds include Maryland, New Jersey and Oregon. Illinois has revamped Sudan legislation under consideration to replace the previous Illinois Sudan Act that was struck down in Feb. 2007 after the National Foreign Trade Council filed suit.

Arizona requires managers to report on holdings in US companies with business ties to Sudan, as well as Iran, North Korea and Syria. Louisiana’s legislation requires reporting on holdings of foreign companies with ties to Sudan, Iran, North Korea, Syria, and Libya. Louisiana is considering legislation that would change the reporting requirement to a divestment requirement and expand the scope of the current legislation from foreign companies only to both foreign and domestic companies.

There has also been action at the municipal and educational institution level with a number of cities and colleges/universities (San Francisco, Philadelphia, Yale University and Dartmouth College among others) implementing policies or regulations that address the investment of endowment/retirement assets in companies with ties to Sudan.

The latest trend that we are seeing in the divestment movement is legislation addressing companies with operations in Iran, either through legislation aimed specifically at Iran or through hybrid Sudan/Iran legislation. This tends to target companies that are invested in Iran's Oil & Gas sector and/or Mining & Metals sector, that supply arms to Iran, that supply goods/services to Iran’s nuclear development program, or that that do business with Iranian organizations that have been labeled as terrorist organizations by the U.S. government. Currently, Florida is the only state that has such legislation passed and signed. However, similar legislation is under consideration in California, Ohio and Illinois.

As the trend in divestment legislation continues to gather steam, the implications for asset managers handling assets for state public funds is significant – ranging from new reporting requirements to actually dealing with divestment and ongoing compliance monitoring. These challenges are multiplied when managing assets for numerous states that have enacted legislation, which may differ somewhat from state to state. At the moment, this trend shows no sign of letting up.