Dozens of protesters have called for Minnesota's state pension fund to sell off its holdings in Israel since the beginning of the war in Gaza.

State leaders say they are bound to consider only maximizing returns on pension investments, to give Minnesota the best chance of paying out pension benefits to retired state employees and teachers. But the state has gotten out of business with other countries before.

In recent years, discussion about divestment has centered around the concept of "fiduciary duty," or an obligation to focus on maximizing returns.

"The people have only given me the power to consider things that affect the fund," State Auditor Julie Blaha, who sits on the state investment board, said in an interview last month after protesters called for divestment from Israel. "I can't use investments to make a symbolic statement."

Blaha said she sees it as the Legislature's job to set investment policy, as has been the case in divestment decisions from the past 15 years. But divestment from South Africa and Namibia in the mid-1980s was driven by executive leaders, according to meeting minutes and other archival materials reviewed by the Star Tribune, and their feeling that Minnesota should not support the apartheid regimes.

Russia, Sudan and Iran

After Russia's invasion of Ukraine in 2022, the Legislature voted in March 2022 to stop investing in Russia and Belarus, Gov. Tim Walz ordered the state to quit contracting with companies in the two countries and urged the Legislature to pass the divestment bill.

The state held about $53 million in Russian investments at the time, and the law gave Minnesota 15 months to sell off Russian and Belarussian holdings.

The Legislature's moves in 2022 mirrored earlier divestment from Iran and Sudan.

A state law required Minnesota to divested from companies doing business in Sudan in 2007. The state has kept tabs on companies that do business in the country — and still does not allow pension funds to be invested in those companies.

Divestment from Iran came after members of the Jewish Community Relations Council raised concerns about investments in companies doing business in Iran during a 2008 meeting of the State Board of Investment. Following the group's concerns, the Legislature passed a law in 2009 placing restrictions on investments in companies doing business in the country.

South Africa

Unlike later divestments, the push for Minnesota to stop investing in companies that do business in South Africa in the 1980s began with the statewide elected leaders who vote on investment decisions, not the Legislature.

Then-Gov. Rudy Perpich, Attorney General Hubert H. Humphrey, Secretary of State Joan Anderson Growe and State Treasurer Robert Mattson initiated Minnesota's divestment by passing a resolution at the State Board of Investment in October 1985, over then-State Auditor Arne Carlson's dissent.

Following more than a decade of activism against the apartheid system in South Africa, states and state universities began divesting from South Africa in the late 1970s. The Minnesota Legislature introduced a bill to divest in 1982, but the measure failed.

Mattson was among the earliest advocates for divestment among state leaders. In a 1985 letter, he reminded Perpich and Humphrey that divestment was part of the DFL 1984 platform on which they had both been elected, and urged them to support divestment.

Mattson argued primarily that investment in companies supporting the apartheid system was unacceptable from a moral perspective. Growe proposed a framework for divestment that would express Minnesota's "moral outrage" about the South African regime.

In a September 1985 statement, Humphrey said he found apartheid "morally abhorrent. There is no question in my mind that divestment is a proper response from the state," adding that he would support a strategy that would minimize investment losses.

Notes in Carlson's files housed at the state archives indicate that Humphrey saw financial risks to both divesting and holding onto South African investments.

Carlson, the only Republican serving on the investment board at the time, was adamantly opposed to the idea of even forming a task force to examine the issue, and argued that divestment would lead to lower returns on pension investments.

Mattson countered, saying that the growing divestment movement, plus instability in South Africa and Namibia, would make those investments less valuable.

Carlson, reached this month, said he did not recall specifics of the South Africa discussion, but said he remained committed to the idea that maximizing returns should be the only principle guiding investment decisions.

Though the discussion began with the moral dimensions of divestment, the resolution passed by the State Board of Investment ultimately combined both ethical and fiduciary reasons to divest.

The resolution combined both reasons, stating apartheid systems in South Africa and neighboring Namibia were "morally repugnant to all who believe in the inherent rights of individual freedom," and the apartheid system "casts doubt on the safety and stability of investment in companies" that did business in either country.

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