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Lansing wants to divest from Russian funds. Actually doing that is complicated

Flickr - MI SHPO

Lansing Mayor Andy Schor and other local leaders want to divest the city from Russian funds in protest of that country’s invasion of Ukraine.

But actually disentangling the city’s money is complicated.

Russian investments make up a fraction of 1% of Lansing's $364 million pension portfolio, according to a presentation from George Tarlas, a consultant for the city.

But that money’s tied up in funds that are co-mingled with other assets in a pool backed by multiple investors. Lansing can sign off on an overall strategy, but doesn't approve specific investments, Tarlas said.

To completely divest from Russia, Tarlas says the city would need to take the "drastic" step of broadly pulling out of foreign investments connected to a slew of countries.

"To carry it out to zero allocation is a bit like taking a sledgehammer to a mosquito," he said.

Instead of doing that, Lansing’s retirement boards are considering a non-binding resolution that would ask the city’s money managers to take Russian companies out of the city’s pension investment mix.

But even that could prove complicated in the current climate as investors struggle to offload Russian assets.

The U.S. and other countries are using sanctions, like blocking access to an international payment system used by banks,to inflict financial pain on Russia. Meanwhile, Russia's central bank has taken steps to prevent foreigners from selling Russian assets.

Along with pension funds, Lansing invests a sliver of a $2 million cemetery maintenance account in Russian companies, according to a city spokesman.

Schor's ordered the city treasurer to redirect those funds, which make up only about $8,400, the spokesman said.

In a news release, the mayor also called upon the two boards overseeing city pension plans to divest from Russia.

This comes after Schor watched a virtual presentation from the mayor of Ukraine's capital city to the U.S. Conference of Mayors.

"(It) was very powerful," Schor said. "He's literally holding guns and firing and protecting his city."

Councilmember Carol Wood, a member of Lansing's Police and Fire Retirement System Board, says that while a small portion of the city's investments are connected to Russia, it's important to take a stand.

"Every act by every municipality ends up making a difference," she said. "So if we're just one drop in that cup, that cup eventually fills with each drop that's happening.”

At the behest of Gov. Gretchen Whitmer,the board overseeing state pension plans voted last week to divest from any companies based in Russia or Belarus.

That process will start "as soon as practical when market conditions allow," according to a news release from the state treasury department.