By: Mary Steurer(ND Monitor)
The North Dakota Senate on Tuesday sank a bill that would have authorized the State Investment Board to divest from Legacy Fund holdings in companies headquartered in China.
Under the “prudent investor rule,” which governs trustees of investment portfolios, the board must prefer “qualified investment firms and financial institutions with a presence in the state.” It cannot choose not to favor a company purely based on its home country.
House Bill 1330, which failed by a 20-26 vote, would have updated this language to let the board voluntarily cut ties with Chinese businesses.
According to the North Dakota Retirement and Investment Office, that applies to only about $246 million of the $12 billion in the fund. That equates to about 2.1%
Primary sponsor Rep. Bernie Satrom, R-Jamestown, has said North Dakota should do away with holdings in Chinese companies due to human rights abuses committed by the Chinese Communist Party, as well as concerns that China’s government is a national security threat to the United States.
Sen. Sean Cleary, R-Bismarck, said he supported the bill because it addresses these problems while still giving the State Investment Board flexibility over the fund’s investments.
“Our own intelligence agency has identified that there are significant threats that come from the Chinese Communist Party,” he said on the Senate floor.
Critics of the bill said it would hamper growth of the Legacy Fund by discouraging investment in an entire country’s market.
Sen. Jerry Klein, R-Fessenden, said it’s unusual for North Dakota to single out countries in state law.
The closest comparison may be a 2023 law the North Dakota Legislature adopted prohibiting investment practices that would result in a boycott of Israel.
Klein said many Chinese companies are good-faith business partners to the United States and shouldn’t be penalized just because of where they’re located.
The Retirement and Investment Board took a neutral stance on the bill.
Earlier this month, the Senate passed another Legacy Fund-related policy, House Bill 1319, which requires the Retirement and Investment Office to create a website detailing Legacy Fund holdings. Gov. Kelly Armstrong signed the bill into law last week.
