According to an audit that's been conducted over the past year, the companies — which include Areva, a French firm involved in the nuclear power industry, and Petroleo Brasileiro S.A., a Brazilian oil company — account for a total $25.9 million of investments held by state funds.
State Sen. Mike Stack (D-District 5), who introduced the Protecting Pennsylvania Investments Act — signed into law by then Gov. Ed Rendell on July 2 — said that the implementation of the law is going as well as could be expected. The statute stipulated that the four affected state funds had 36 months to be in full compliance.
"It is moving forward in a positive way," said the Northeast Philadelphia lawmaker, whose office last week released the updated financial information related to compliance with the law, known also as Act 44.
The Pennsylvania law came as part of a broad effort on the part of local, state and federal government to use economic leverage to hamper Iran's efforts to obtain nuclear weapons and to further isolate Sudan, which has been accused of committing genocide against its own people. The Pennsylvania Jewish Coalition lobbied heavily for the law's passage.
Earlier this month, Iowa became the latest of more than 20 states that have enacted some form of divestment action against either Iran or Sudan.
This week, the U.S. State Department called for sanctions against two new international maritime firms, including an Israeli company, Ofer Brothers Group, on the grounds that it has investments in Iran's energy sector.
And a new sanctions bill in the U.S. Senate — the Iran, North Korea and Syria Sanctions Consolidation Act of 2011 — aims to increase the pressure on firms doing business with Iran's energy sector.
The Harrisburg law pertains to the state's four largest public funds: the Public School Employees' Retirement System, which is the largest fund with roughly $36 billion in holdings; the State Employees' Retirement System; the Pennsylvania Municipal Retirement System; and the Treasury Department, which had completed its own divestment before the law was passed.
Funds Are Audited
The statute requires the funds to divest from foreign companies that have at least $20 million in investments in Iran's energy or military sector or $20 million in Sudan's military, energy and oil sectors. The law didn't apply to American companies since federal law already prohibits such business ties.
After the law was enacted, IWF Financial, a Maine-based consulting firm, was selected through a competitive bidding process to conduct an audit of the four funds, according to Michael Smith, a spokesman for Pennsylvania State Treasurer Rob McCord.
The audit found that the four funds had invested in 38 companies not in compliance with the law, totaling $198 million in investments — a number that fell short of what some predicted.
But, according to Stack's office, nine of those firms have already cut ties with either Iran or Sudan and five others have said they are in the process of doing so.
According to Smith, the auditing firm is still monitoring the funds and it's possible it could discover more holdings.
So, is it too soon to say whether the law has had the desired effect?
Christopher Holton, who has lobbied on behalf of state divestment efforts for the Center for Security Policy, a Washington, D.C.-based think tank, said that such efforts can't be looked at in a vacuum, but rather as part of a much broader movement.
"I measure the impact by the effect on Iran and the number of companies that have pulled out of Iran, not by how many companies get their stocks divested. A few high-profile companies have decided to close shop in Iran, partially due to state pension divestment," said Holton.
"State divestment is part of an overall effort and, in my view, cannot be viewed on its own," he added. "For example, tougher federal sanctions came about as a direct result of the state level divestment campaign."