Rows of lawn chairs faced a stage on the New Haven Green Wednesday evening, set up for The Connecticut Mirror’s “In the Room” interview with State Treasurer Erick Russell as part of the International Festival of Arts & Ideas.
While many audience members filing in immediately found their seats, others made a beeline for Russell, who was mingling with the crowd. Some carried signs calling for divestment from Israel, while many donned red, black or green keffiyehs.
After a brief interaction, Russell excused himself and made his way to the stage to begin the talk with the CT Mirror’s John Dankosky.
Dankosky explained to the crowd that he accepts questions from the CT Mirror’s members in advance for the interview series. “Overwhelmingly,” those questions were about one topic in particular: divestment from Israel.
Investments in Israel
Out of the state’s $56 billion portfolio, around $100 million is invested in Israel, either directly or indirectly, according to Russell. The exact total varies day by day.
“My top priority as treasurer is to maximize returns for pensioners, and that ultimately guides decisions that we are making on an investment front, to get the best risk adjusted returns for our state employees and our teachers and our retirees,” Russell said.
He explained that most of the state’s investments in Israel are “passive” through outside companies’ managers that have flexibility over where to invest the portion of state funds given to them.
The state’s only direct investment in Israel is through the purchase of two bonds prior to Russell’s tenure. They are set to mature in 2025 and 2026.
When it comes to divestment, the treasurer’s office takes guidance from the state or federal government through the Office of Foreign Asset Controls. Russell brought up examples of state divestment from Iran and Sudan due to risk management that came through the federal and state government.
“There are calls for me to completely divest from a lot of things on a very regular basis,” Russell told the crowd. “Our policy has always been that we go through a robust process. Anytime that we have just completely divested from a country, there has been federal guidance on that, and there’s been a robust due diligence process or a legislative process.”
That process included two pieces of legislation: HB 5358 in 2013 was related to Iran investments and Senate Bill 881 in 2011 was related to both Iran and Sudan. Both of those pieces of legislation had to pass the Connecticut General Assembly before the treasurer’s office could act.
Previous bills have been introduced for the state to divest from fossil fuel companies. HB 5733 in 2015 did not make it to a vote, but the treasurer’s office still considers environmental, social and governance (ESG) factors when looking at its portfolio.
“I have a fiduciary obligation to maximize return for pensioners, and I think if we get into some of this mindset that [if] we’re looking at anything wrong happening in any country across the world or any industry, we wouldn’t be invested in anything,” Russell said. “… We engage on a very regular basis to make sure that companies we’re doing business with have the best possible practices. And a lot of that is about mitigating risk, but all of this is a cost benefit analysis as we are doing this work.”
Previous divestment history
Besides divestment from specific nations, Connecticut has also previously divested from certain industries. Namely, gun manufacturers.
Under Russell’s predecessor, Treasurer Shawn Wooden divested over $30 million from four gun manufacturers: Clarus Corporation ($114,087), Daicel Corporation ($233,668), Vista Outdoor Inc. ($626), and Olin Corporation ($1.61 million), and one company that manufactures ammunition for civilian firearms, Northrop Grumman ($28 million).
Not only had the state “led the charge on gun reform,” according to Russell, but it also proved to be a risky investment.
“Many civilian gun manufacturers [are] being sued, having significant losses,” Russell said. “Those are all risks for us as an investor… from a long term perspective, we also know the cost of gun violence on our communities, which, again, are factoring [in] a kind of big picture risk for our state. And at the end of the day, I think we can access similar investments that are much more beneficial to our state with the same return and risk profile.”
Russell also touched on the growing popularity surrounding discussions of divestment, such as college protests that swept campuses across the state and country. He called it a “trendy topic.”
Divestment, Russell said, is “not going to move the needle” on many of the issues advocates encourage him to examine in the state’s investment portfolio.
“If we divest, someone else is going to pick that investment up, and the business is still going to thrive, and pensioners are not going to get returns off of those investments, but they will in many other states,” Russell told the crowd. “What we’ve chosen to do is to be very actively engaged with companies that we are investing in.”
By investing in these companies, Connecticut gets a “seat at the table” and can push forward change from the inside, Russell said.
The state was previously invested in the manufacturing company American Pacific. The company operated 12 coal plants around the nation; however, through continued engagement with the Connecticut treasurer’s office, the company agreed to close down the plants.
Economic development hits close to home
Besides analyzing divestment, Russell’s office is additionally responsible for spurring economic development throughout the state.
While one of the wealthiest states, Connecticut also has some of the nation’s highest income inequality and one of the largest wealth gaps. For example, Fairfield County’s personal income per capita was more than double that of Windham County.
Russell is looking to close that gap.
One way the office of the treasurer has begun to address “cycles of generational poverty in our state” is through the ‘baby bonds’ program.
For each eligible baby, $3,200 is invested on their behalf through a trust fund administered by Russell’s office.
To access that cash, the recipient must be between the ages of 18 and 30, pass a financial literacy test and be a resident in Connecticut. The money must be used for education, buying a home, investing in a business or saving for retirement.
“[This resource] levels the playing field and creates opportunity that they probably could not have imagined otherwise,” Russell said. “These are all resources that are going to be reinvested back into our communities, largely into communities that have been under-resourced historically, and so we work very collaboratively with the legislature around that initiative. We are constantly looking for ways to move the needle.”
The program and the state’s larger issue with income inequality and economic development is a personal one for Russell.
Growing up right in a “tough area” of New Haven, Russell helped his veteran father operate a convenience store serving hot dogs and hamburgers from the time he was 6, sweeping the floors and manning the cash register. He was the first person in his family to graduate from college.
“Those experiences always really guided me in wanting to do something positive and to make sure that I actually stayed in New Haven and was active in the community,” Russell said. “There were plenty of people who were successful coming out of neighborhoods like the one I grew up in, but you didn’t always see them there, or they didn’t come back. And so the examples of possibility and opportunity weren’t always readily available. So I think all of these experiences shaped me in a huge way.”
Once elected state treasurer, Russell was the first Black out LGBTQ+ person in American history to win an election for statewide office.
Because of his background, Russell says he has a deeper understanding of those that “aren’t in the room.”
“There’s this obligation to make sure that you are opening doors and reaching back to pull other people along with you,” Russell said. “And if you don’t have people with different experiences and with diversity of thought and perspective at the table, policy doesn’t change… I try to bring that perspective to these rooms when I’m in them.”