The New York State pension fund has $12 billion invested in companies that do business with nations identified by the State Department as sponsors of terrorism

A report released yesterday by state Senator Jeff Klein, a Democrat who represents parts of the Bronx and Westchester County, found that 16% of the $140 billion fund is invested in companies that do business with Syria, Iran, Sudan, and North Korea.

Mr. Klein is sponsoring legislation dubbed the Terror Free Investment Act, calling on the state comptroller, Thomas DiNapoli, to divest the pension fund from companies that do business with state sponsors of terrorism.

“We’re not going to continue funding our enemies,” Mr. Klein said. The senator said New York was “behind the curve” on the issue, noting that California, Florida, and New Jersey have already divested from companies that deal with the terrorist states.

The fund, which handles pensions for all state employees and is the second largest pension fund in the country, has investments in 235 such companies.

A spokesman for Mr. DiNapoli said the comptroller was “aware of these issues,” and is reviewing them. Mr. DiNapoli announced last week that he would use the state pension fund to pressure the Sudanese government to end the genocide in Darfur, taking steps that will eventually include divestment if companies refuse to pull out of Sudan.

Mr. Klein, who said he expected the bill to garner bipartisan support, noted that pressure from state pension funds could force corporations to stop doing business with states that promote terrorism.

A threat from the pension fund would force the corporations to make a choice, he said. “Do you want to continue to have our investments, or do you want to sponsor these countries that sponsor terrorism?”