Oregon Pension Stung by Investments in Socially Irresponsible Companies Via Index

In a time where institutional investors around the country are facing pressure from constituents to invest in an environmental, social, and governance (ESG)-conscious format, any news regarding an investment violating these trends is bad news.

The Oregon State Treasury is the latest to receive such attention, with the Associated Press recently publishing a report citing officials that condemn some of its holdings. According to the report, the state pension fund was found to have invested in a smartphone spyware company that’s used to oppose “human rights defenders, dissidents, and journalists by repressive regimes.” These investments run congruent to the state’s investments in two prison companies that run immigrant detention facilities, according to the report.

Oregon State Treasurer Tobias Read said in a statement that these investments are captured via index, and noted the pension has no control over what sorts of companies are included or disengaged from the index. By fully repealing themselves from the index investment, Oregon will “incur costs that violate the ‘paramount objective’ of making money,” the AP said the treasurer’s office stated.

The pension also has a $233 million investment in Novalpina Capital, which marketed itself to the pension’s council by saying “as investors, we assume we have to be contrarian. We have to find deals that other people don’t see or don’t want to do for various reasons,” according to a 2017 meeting recorded on the treasury’s website.

Novalpina Capital bought a large stake in a spyware company alleged to be involved in the murder and dismemberment of Jamal Khashoggi, a journalist who was killed in the Saudi consulate in Istanbul last year, according to the AP’s report.

“It’s unclear whether Novalpina’s founders already intended to invest in NSO Group [the co-owner of the Pegasus spyware] when they came to Oregon. Novalpina did not respond to a request for comment,” the AP reported.

Novalpina targets mid-market companies with an enterprise value of €200 million-€1 billion, with a broad-pan European focus in markets and industries undergoing fundamental transitions, according to its website. “All investments made by Novalpina take into account the ESG principles and we are signatories of the PRI, the Principles for Responsible Investments, promoted by the United Nations,” a statement on its website reads.

Mistaken index investments have been popping up recently, oftentimes unbeknownst to the investors in such indices. For example, the Tennessee Consolidated Retirement System was found to have invested more than $720,000 in a company in the marijuana industry, despite the state government’s hard-pressed agenda against the drug.