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Caisse de dépôt et placement du Québec says it recently sold hundreds of millions of dollars in stock of seven Russian companies that Canada first placed sanctions on in 2015.

The giant Quebec pension fund manager held the shares in the Russian banks and energy companies when Canada placed them on lists in its Special Economic Measures (Russia) Regulations, developed in 2015 after Russia’s invasion of the Crimea in Ukraine.

The regulations prohibited business dealings with individuals and some companies on the list, and banned debt or equity financings of others, including the Caisse holdings.

The financing regulations didn’t apply to ownership before the companies were added to the list, however, meaning the Caisse was free to continue holding its stakes in the Russian companies.

The Caisse maintained ownership in the companies through at least the end of 2020, according to the Caisse’s holdings records. At recent prices, its Dec. 31, 2020, holding in Gazprom would have been worth $157-million; Sberbank of Russia, $114-million; Novatek, $58-million; and Rosneft Oil Company, $25-million. The Caisse also had positions of less than $10-million in Transneft, Surgutneftegas and VTB Bank, according to S&P Global Market Intelligence.

The Caisse had $390-billion in assets at June 30, 2021, meaning the Russian stocks made up less than one-10th of 1 per cent of its portfolio. Caisse spokeswoman Kate Monfette said the Russian stocks were “index-managed,” meaning the Caisse held them as part of a stock index, as opposed to making an active choice to invest in the companies.

“Before yesterday’s announcement, Canadian sanctions only applied to specific entities,” Ms. Monfette said in an e-mailed statement. “While the [holdings] were acquired before the sanctions were passed, we have disposed of all those under sanctions.”

Ms. Monfette would not specify when the sales took place.

“We will continue to carefully respect all Canadian sanctions and our position hasn’t changed: we have no interest in direct investments in Russia,” she said.

The Canadian government is rushing to join other Western countries in developing economic sanctions for Russia as it appears on the verge of invading neighbouring Ukraine. The United States, the European Union, Britain, Australia, Canada and Japan responded with plans to target banks and elites while Germany froze a major gas pipeline project from Russia.

Prime Minister Justin Trudeau said Tuesday Canada will ban Canadians from “all financial dealings” with what he described as the “so-called independent states” of Luhansk and Donetsk; bar Canadians from buying Russia’s sovereign debt – meaning government bonds or other efforts by Moscow to raise capital – and place sanctions on two state-backed Russian banks – VEB and Promsvyazbank – and prevent any financial dealings with them.

Ivan Tchotourian, a law professor at Université Laval in Quebec City who writes regularly on corporate social responsibility and governance, said “it’s good” that the Caisse has disposed of these assets, “but it took them seven years. They could have acted with a bit more urgency … There might not have been any legal obligation to sell. They manage their portfolios as they see fit. But it seems to me there was a moral obligation to do something.”

Mr. Tchotourian said the Canadian government should consider requesting that the country’s big pension funds halt all investments in Russia. “There’s a chance here to send an even stronger message” to its existing political and economic sanctions, he said.

As of Dec. 31, 2020, the Caisse had a total of 36 Russian stocks, including companies not on the Canadian sanctions list. They would be worth a little less than $900-million at recent prices, with more than a third of the holdings worth $2-million or less, according to S&P Global Market Intelligence.

For years, the Caisse has shied away from direct investment in Russia and has said it won’t do any deals in the region.

“There are a lot of geographies that we’re just not willing to go to,” Caisse chief executive officer Michael Sabia told reporters at the pension fund’s annual results news conference in 2017. “For instance, Russia is a country where we’re not going anywhere near right now.”

The reasons for the Caisse’s skittishness mirror many of the market challenges highlighted by Export Development Canada and the U.S. Department of Commerce in country reports on Russia. Among them: widespread corruption, lack of transparency, inconsistent application of laws and regulations, a continuing geopolitical crisis, and deteriorating relations between Russia and the West. Another factor is the Kremlin’s say in any investment in what it deems “strategic sectors” of the Russian economy.

Other Canadian pension plans seem to avoid owning Russian public companies. A search of S&P Global Market Intelligence shows no Russian public-company holdings for Canada Pension Plan Investment Board, which makes broad disclosure of its positions.

Most major Canadian pension plans have more limited or no disclosure of equity holdings, outside of what securities regulators in various countries require.

S&P Global Market Intelligence shows no Russian public-company holdings for Ontario Teachers’ Pension Plan, Public Service Pension Plan, Ontario Municipal Employees Retirement System, and Healthcare of Ontario Pension Plan.

Alberta Investment Management Corp. and British Columbia Investment Management Corp. each had about $2-million invested in Mobile TeleSystems Public Joint Stock Co., a New York Stock Exchange-listed Russian company that is not on the Canadian sanctions list.

With files from Steven Chase and Reuters

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