B.C. public-sector pension firm BCI was selling off Russian holdings before Russia’s invasion of Ukraine and international sanctions ground that process to a halt.
“BCI has not only been working to sell the Russian shares in our clients’ portfolios but also to have Russia removed from all global and emerging market indices,” said Gordon Fyfe, CEO of B.C. Investment Management, which goes by the name of BCI. “We don’t normally comment publicly on our investment activities, however given the egregious actions of Russia it is important to make an exception,” said Fyfe, who was also under pressure from opposition parties in the B.C. legislature to take action on divestment.BCI manages $200 billion in pension assets on behalf of 690,000 civil servants and retirees, which, at one point, included $130 million in shares of Russian state-owned energy companies and a key bank.Fyfe said international sanctions, trading restrictions and Russia’s ban on foreign sales of Russian securities have brought BCI’s sales to a halt, but “we will continue to work to sell the $107 million in Russian stock that remains.”
In the statement, Fyfe said the firm “recognizes that holding Russian securities in our portfolio is not aligned with our values as an organization nor that of our clients, and our hearts go out to the people of Ukraine.”
BCI, in a previous statement, said its funds had minimal exposure to Russia and that it was following existing Canadian sanctions, but didn’t indicate what other steps it was taking.
Pressure to make more of a statement increased Tuesday after Alberta Investment Management Co. CEO Evan Siddall announced in a tweet that the firm will divest “our small number of Russian positions as soon as possible,” though he didn’t spell out how AIMCo will accomplish the step.
Following that statement, on Tuesday B.C. Opposition House Leader Shirley Bond repeated the Liberal party’s demand in the legislature that Finance Minister Selina Robinson take action on getting rid of those assets.
“Again, to the minister of finance, what specific action will be taken to ensure that those funds are divested?” Bond asked.
Robinson answered that while she is legislatively prohibited from directing the pension fund’s managers, “BCI did hear the position of this House” and will be “taking action,” she said hours before Fyfe released BCI’s statement.
Disposing of the rest, however, can’t involve selling, at least not immediately while the Russian stock market remains closed, said wealth manager John Nicola.
“As a practical matter, there’s no market for the shares,” said Nicola, CEO of the firm Nicola Wealth. “Therefore it is an interesting position to take, but may not result in a tangible outcome for a very extended period of time, arguably until the sanctions have been removed.”
BCI could write-off the value of its remaining investments in the meantime, said University of B.C. economist Werner Antweiler, but even when Russian markets reopen, divestment will prove challenging.
“Now we have a situation where you want to divest an asset that is in a foreign country that’s being sanctioned,” Antweiler said. “Then who should be the buyer other than the Russian state?”
Then sanctions on Russian financial institutions would also make transactions to divest of shares difficult, he said.
And shares, as financial instruments, “cannot just be destroyed,” Antweiler said. “It’s not like we can take imported beverage bottles out of the shelf from the B.C. liquor stores.”
Reuters reported that Quebec’s public-sector pension fund, Caisse de depot, said last week that it had disposed of “certain investments that were acquired before sanctions were passed” related to Russia. The news agency also reported that the Canada Pension Plan Investment Board, Canada’s largest pension fund, had no direct exposure to Russia, and any indirect exposure is minimal.