The state government’s investment corporation Funds SA have been working to divest from $60m in Russian securities following Russia’s invasion of Ukraine on February 24.

In an update on March 9, Funds SA said its Russian holdings had been whittled down to $9m – approximately 0.02 per cent of its $41bn in assets under management.

Labor made a pre-election commitment to ensure the public sector superannuation fund “divests all investments in Russian assets” and has introduced legislation allowing the Treasurer to issue a ministerial direction on the matter.

“We know this is the right thing to do – it is unconscionable for state government funds and public sector workers’ superannuation to be invested in Russian assets,” then-Opposition leader Peter Malinauskas said on March 5.

But Treasurer Stephen Mullighan has moved to temper expectations the fund will be able to fully divest itself from Russian holdings, highlighting concerns raised to him by Funds SA management.

“It is important to recognise that some of the investments are extremely difficult to exit from,” he told parliament on Thursday.

“It might be, for example, that the state has a position in some sort of pooled fund … and some of the investments held in that fund may be considered to be Russian assets, so not a direct asset holding but an indirect asset holding.

“There is likely to be a contractual obligation for the state to maintain its presence or its holding of units within that pooled fund that cannot simply be exited from in short order.”

He said while Labor wanted to divest from Russia’s assets “as quickly as possible”, it also wanted to protect the value of the government’s remaining assets “to the greatest extent possible”.

“You could imagine that the very strong appetite … from the community to making sure that the government held no asset positions with Russian investments might perhaps wane considerably if it became clear that in order to exit from those investments it might incur losses in the tens or hundreds of millions of dollars,” he said.

Mullighan said the pooled fund arrangements were “constraining the state to be able to immediately exit from those asset holdings”.

“To do so would risk the state being in breach of the arrangements that were entered into when those units were undertaken and potentially risk incurring very significant losses,” he said.

Funds SA said in its March update that “trading restrictions in key markets” were making it “difficult” to divest its remaining $9m in Russian holdings.

Shadow treasury spokesperson Matt Cowdrey said the $9m figure may have only changed “marginally” over the last four months.

“It does appear that the remainder of the funds will be difficult to divest while strict international trade and economic sanctions exist,” he told parliament.

“Despite this, Funds SA has been actively engaged with its external investment managers regarding exposure to Russian securities and has been implementing sanctions imposed by the Australian government.”

Cowdrey said the Opposition would support the government’s divestment legislation but reserved the right to make amendments in the Upper House.

The legislation gives the Treasurer the power to issue a ministerial direction “in relation to divestment of Russian assets”.

However, it also states that any action taken by Funds SA to carry out the direction “must be taken prudently and consistently with the Corporation’s responsibilities to the entities for whom it invests and manages funds”.

“You will see in the way in which the bill has been drafted that the action that the corporation takes to divest itself of these assets has to be taken prudently – and importantly consistently – with the corporation’s pre-existing and overall objectives,” Mullighan said.

“That makes it clear that the bill empowers only the corporation to take action in a way which does not otherwise place remaining investment funds at great risk.”

The Upper House will debate the divestment legislation when parliament returns in September.