Tenney Urges NYS Comptroller DiNapoli to Divest NY Pension Fund from Chinese Companies

Washington, DC – Congresswoman Claudia Tenney (NY-22) today sent a letter to New York State Comptroller, Thomas DiNapoli, urging him to divest the New York State Common Retirement Fund (NYSCRF), the state’s pension plan, from Chinese companies. China’s illegal and destabilizing practices and continued support for Russia’s unprovoked invasion of Ukraine warrant such actions.

In the beginning of March, DiNapoli announced the state pension fund would end new investments in Russian companies and that his office would begin a review of ways to divest from approximately $110.8 million in already existing Russian investments. In response, Tenney highlighted the elevated risks to investors and American security posed by investment in Chinese securities and called on DiNapoli to take similar steps regarding China.

The Chinese economy is controlled by the state and the Chinese Communist Party, and many non-state actors, including firms listed on U.S. exchanges and those nominally headquartered overseas, contribute to the nation’s civil-military fusions and its human rights atrocities, such as the ongoing genocide being perpetrated against the Uyghur population. Chinese companies listed on U.S. stock exchanges have refused to produce their audits for U.S. regulators, a basic investor protection standard with which all U.S. listed firms must comply. Chinese state-backed firms also form the backbone of China’s predatory trade practices that have decimated New York’s own manufacturing base. NYSCRF’s continued exposure to Chinese securities is an unsustainable investor risk factor, and it fuels America’s most dangerous adversary.

More than 1.1 million New Yorkers are members of the New York State and Local Retirement System and rely on the NYSCRF for their retirement.

“The retirements of those who faithfully served the public and earned their pensions should not be risked by irresponsible investments in Chinese companies, which openly ignore U.S. investor protections and act at the behest of the Chinese Communist Party. It is time to stop the flow of New York public pension funds to China, which is engaged in manifold human rights abuses, economic predation, intellectual property theft, and cyber-enabled tyranny. Comptroller DiNapoli must take immediate action to end New York’s public funding of these problematic entities and protect our communities from further devastation,” said Tenney.

“American investor dollars should not be used to finance a Chinese Communist Party that continues to engage in human rights abuses, genocide, and the destruction of the environment. ASA applauds Congresswoman Tenney for her leadership in asking the NYS Comptroller to end its pension investments in Chinese companies,” said Chris Iacovella, CEO of the American Securities Association.

“This is exactly the kind of leadership we need from Congress to ensure that China and Russia are not being funded by their access to U.S. capital markets and unwitting American investors, pensioners, and retirees,” said Michael Stumo, CEO of Coalition for a Prosperous America. “Every private and public pension and retirement fund in the country should immediately divest entirely from these two authoritarian regimes that are actively working against the United States. Additionally, it is time for Congress to hold Wall Street accountable for helping Russia and China exploit U.S. capital markets and tens of millions of unwitting American investors.”

The full text of the letter is available here.

Dear Comptroller DiNapoli,

I commend you for directing the New York State Common Retirement Fund (“NYSCRF”) to cease acquiring new holdings in Russian companies and engaging in a divestment review of current investments. Our public pension funds have a moral obligation not to be a source of capital for Vladimir Putin’s aggression and war crimes against the Ukrainian people. Furthermore, full divestment will protect retirement fund beneficiaries and their families by reducing the approximately $110.8 million in current exposure of public equity investments in Russian companies.

While this decision marks a significant show of support for the people of Ukraine, we can and must do more to combat our economic integration with authoritarian regimes that pose significant and direct threats to the free world, American national security, and our economic prosperity. As such, I urge you to take similar steps to also divest the New York State Common Retirement Fund’s holdings in Chinese companies.

As of May 5, 2021, there were a total of 248 Chinese companies listed on the New York Stock Exchange, NASDAQ, and NYSE American. The combined market capitalization of these entities totals $2.1 trillion. While all companies listed on American stock exchanges, both foreign and domestic, are by U.S. law subject to audit reviews by the Public Company Accounting Oversight Board (PCAOB), Chinese companies have systematically flouted this rule and ignored this important investor protection measure. As a result, Congress passed the Holding Foreign Companies Accountable Act, to delist PCAOB non-compliant firms. When this bill was signed into law in late 2021, a three-year countdown to delisting began. NYSCRF’s exposure to firms that may soon be kicked off American stock exchanges is a significant risk factor.

New York State’s failure thus far to reduce NYSCRF’s exposure to the domestic Chinese market is a violation of your fiduciary duty to the over 1.1 million members of the New York State and Local Retirement System. Beyond the total lack of transparency into Chinese companies, the Chinese economy lacks the most basic practices and mechanisms of voluntary exchange and rule of law to safeguard investors. The Chinese market is controlled by the Chinese Communist Party. Further, many of your portfolio companies may be directly contributing to illegal or otherwise destabilizing activities, including but not limited to supporting atrocities against the Uyghur population, the build-up of the Chinese military, and unfair trade practices that have decimated our industrial base, including my Upstate district.

Unfortunately, NYSCRF seems to be moving in the wrong direction. Just last spring, NYSCRF approved over $38 million in capital commitments to China-focused investments such as the Boyu Capital Fund V, Boyu Capital Growth Fund I, the 5Y Capital Growth Fund I, and the 5Y Capitol Evolution Fund II. Such investments are completely unacceptable and encourage the engagement in human rights abuses across the globe. The Chinese government and Communist Party have positioned themselves as fierce adversaries of the United States for decades. It is time that we meet this opposition head on, including with much needed divestment.

At the same time that NYSCRF may be fueling the Chinese Communist Party’s malign activities, you have stated your intention to divest $238 million in shares and bonds from 21 oil and gas companies, including U.S. based firms like ConocoPhillips, Pioneer Natural Resources Co. and Hess Corp. for their failure to demonstrate viable net-zero transition plans. These U.S. companies provide high-paying jobs to American workers, including many New Yorkers. Moreover, they are absolutely essential to our energy independence ranking third, seventh, and tenth, respectively among oil and gas companies. It defies logic that under your management, the NYSCRF is focused on penalizing American companies in good standing, while turning a blind eye to investments in companies so closely tied to the Chinese Communist Party.

Further, such behavior is grossly hypocritical. China persistently emits carbon dioxide at a rate more than twice that of the United States, while simultaneously constructing coal-fired power plants faster than any renewable sources of energy. It is therefore difficult to understand why U.S.-based oil and natural gas companies are subject to multi-million-dollar divestments for failing to meet New York State’s environmental standards, yet CCP controlled companies are held to no such obligation by the retirement fund. This is a glaringly obvious double standard that I hope you will examine and reconsider for the sake of your fund’s integrity.

The hard-working members of the New York State and Local Retirement system deserve to have their assets administered in a morally and fiscally responsible manner. No one should be profiting from the human rights violations of Russia or China, and New York State must immediately work to divest entirely from both nations. Thank you for your time and consideration in this matter.

Sincerely,

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