The nation’s largest public pension fund is leaving money on the table by favoring environmental and social causes in its portfolio, a business-backed nonprofit argues in a study it’s releasing Tuesday on the California Public Employees Retirement System.
The report by the American Council for Capital Formation criticizes CalPERS’ sustainable investing strategies, which include engaging with companies to encourage them to address climate change, pressuring companies to diversify their boards of directors and investing in certain funds that nurture companies with those priorities.
The report argues those strategies have not paid off and that CalPERS would do better to focus solely on making money to protect the pensions of 1.8 million California public workers and retirees.
“The use of these funds to advance an environmental agenda has plunged the system and California into a building financial crisis,” the report says.
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California's two major public pension systems are underfunded and are asking local governments to pay more. Critics want to reduce benefits, while others say policymakers should allow time for recent changes to take hold.
CalPERS spokesman Wayne Davis said the fund is committed to its sustainable investment program, which he said has helped to diversify corporate boards and compel companies to discuss climate change.
“We’re passionate about and fully committed to advocating on behalf of shareowners for the right to have a say in how the companies we invest in are run,” he said. “We stand behind our efforts. Any suggestion that we stop engaging with companies on behalf of our members is laughable.”
The business-backed group based its findings in part on an analysis of CalPERS’ lowest-performing private-equity investments.
Four of the nine lowest-performing funds were marked as focused on renewable and clean energy. None of the 25 top performers had a similar focus. The report also describes five investments in solar energy companies that soured for CalPERS.
“Rather than focusing on getting the fund back on firm financial footing, CalPERS’s management is making questionable investments of pensioners’ money into social and political causes that are not yielding acceptable returns. And even more troubling, because of how big the fund is and how much influence it wields, it’s actually now forcing other large investors and proxy advisory firms with which it does business to follow suit,” Tim Doyle, the group’s vice president, said in a written statement.
Doyle also compared the fund’s investments with the personal investments of its top executives and its board members. He highlighted financial disclosure forms from Chief Investment Officer Ted Eliopoulous and CalPERS Board of Administration member Bill Slaton. Neither reported green energy investments.
Sustainable “investing for thee, but not for me,” the report joked.
The report comes at the end of a year in which CalPERS repeatedly faced calls from environmental advocates and left-leaning politicians to more aggressively confront climate change, make a stand on gun violence or take activist stands against Trump administration policies.
Some of the proposals included compelling CalPERS to divest from the controversial Dakota Access Pipeline, to divest from companies that might work on the Trump administration’s border wall expansion, and, recently, divest from companies that might sell weapons in other states that are illegal in California.
CalPERS, a $345 billion pension fund, has enough assets to pay about two-thirds of the money it owes to California public workers and retirees.