California would sever ties with companies doing business in Iran, Governor Arnold Schwarzenegger said in remarks published on Monday.

Schwarzenegger will sign legislation requiring California's multibillion-dollar state pension funds to divest from Iran, according to The Los Angeles Times.

The move, pushed by a diverse coalition of activists who argue that the federal government has not done enough to keep multinational corporations out of Iran, puts California at the forefront of a national movement, said the paper.

The bill, AB 221, which the governor plans to sign, passed the Legislature with no opposition and follows the state's divestment from Sudan last year.

"California has a long history of leadership and doing what's right with our investment portfolio," the governor said. "I look forward to signing legislation to divest from Iran to take an equally powerful stand against terrorism."

Supporters of the measure contend that it could ultimately lead to the withdrawal of billions of dollars of investment from Iran, forcing the country's leaders to reconsider how they rule. California's public pension funds, worth more than 350 billion dollars, are the retirement accounts of teachers and other government employees.

"No one should underestimate the clout of the state of California and its pension funds," said Danielle Pletka, vice president for foreign and defense policy studies at the American Enterprise Institute, a conservative Washington think tank that has helped lead a bipartisan push for divestment.

"This is an enormous amount of money. Divesting from companies that do business in places like Iran will be a powerful message," he said.