The University of Texas/Texas A&M Investment Management Co. (UTIMCO), which oversees the $22 billion Permanent University Fund for the two university systems, is expanding its sanctions compliance procedures to include companies that are considered scrutinized entities at risk of becoming sanctioned by the US government.
“UTIMCO currently is compiling a list of scrutinized entities that will be reviewed with the board’s risk committee to determine how they will be addressed,” Britt Harris, UTIMCO’s chief investment officer, said in a release. “The financial impact to the endowment is expected to be minimal.”
Although scrutinized entities have not been officially sanctioned by the US government, they are known to conduct business with companies that are sanctioned, and therefore could potentially be sanctioned in the future.
Because of this, says UTIMCO, the market value of the companies could be negatively affected, which would in turn diminish the value of the endowments UTIMCO manages. Current targets of US government sanctions include companies based in North Korea, Syria, Sudan, Russia, and Iran, among others.
While many of these countries are considered “rogue nations,” the list of scrutinized entities includes some mainstream international companies. For example, according to the Texas Government Code, companies engaged in scrutinized business operations in Iran include UK-based Lloyd’s Banking Group, Italian and Spanish telecommunications operators Telecom Italia and Telefonica, mining company Glencore, and Korean automaker Hyundai.
UTIMCO said that as a fiduciary, it already complies with US sanctions laws that prohibit investments in sanctioned companies, and in accordance with investment policies approved by the UT System Board of Regents. The firm said the new additional procedures will extend the same prohibitions to include scrutinized entities.
“UTIMCO’s prudent investment decisions demonstrate not only legal compliance with US law,” Jeffery Hildebrand, chairman of the UTIMCO board of directors, said in a release, “but high ethical and fiduciary standards as it proactively considers divesting from companies that are closely connected with sanctioned companies.”