James Freeman says CalPERS is struggling (2022)
| Environmental, social, and corporate governance |
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September 27, 2022
In his “Best of the Web” column on September 22, The Wall Street Journal’s James Freeman cited years of his newspaper’s coverage of CalPERS to argue that ESG is costing the pensioners and taxpayers of California money:[1]
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There is no such thing as a free lunch. Activists who think they can use public companies to pursue political agendas without endangering shareholder returns are indulging in a fantasy. Disappointing results at a giant government pension fund cannot all be tied to political agendas, but the retired workers who rely on Calpers have every right to demand that fund managers adopt a singular focus on maximizing returns. Heather Gillers reports in the Journal: The nation’s largest pension fund got a scathing performance review Monday when its new investment chief highlighted the retirement system’s underperforming returns... The unusually candid presentation to board members of the California Public Employees’ Retirement System, known as Calpers, showed returns lagging behind other large pensions in almost every asset class during the past 10 years, with private equity trailing the most, 1.3 percentage points... “I am a little disappointed, and I get it, I know there’s lots of things that go into the buckets of why our performance has been poor,” said board president Theresa Taylor. Let’s hope Calpers finally gets it, and a good fresh start would include a determination to urge portfolio companies to simply pursue profits, not politics. For years, the big fund has been fairly active in pursuing the latter, despite early red flags. The Journal’s Carolyn Cui reported in 2010: New funds are springing up that blend quantitative investing, using financial data and computer models, with socially responsible investing, a method of picking stocks based on a company’s environmental, social and governance practices, known as ESG... Calpers has committed $500 million to ESG investing, mainly by avoiding stocks that rank low on the ESG scale. But the returns haven’t been satisfactory, Calpers said. That should have been the end of what was a relatively small experiment by Calpers standards, but the big pension fund pressed ahead…. By 2018, the political agenda was clearly annoying a lot of the people who rely on Calpers to fund their retirements. That year former SEC commissioner Paul Atkins wrote in the Journal: The California Public Employees’ Retirement System this month said no thank you to pension-fund activism. Government workers unseated Priya Mathur, the sitting Calpers president. She was defeated by Jason Perez, a police-union official who criticized Ms. Mathur’s focus on environmental, social and governance investing, or ESG. Mr. Perez emphasizes the agency’s fiduciary duty to maximize investor returns. Calpers represents almost two million California public employees, retirees and families. Yet it mostly makes headlines for its activism, such as divestiture from the tobacco industry. “It’s been used more as a political-action committee than a retirement fund,” said Mr. Perez. “I think the public agency [employees] are just sick of the shenanigans.”… Calpers’ disappointing decade is another reminder that taking care of retirees’ investments requires profits, not politics.[2] |
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See also
- Environmental, social, and corporate governance (ESG)
- Economy and Society: Ballotpedia's ESG newsletter
External links
Footnotes
- ↑ Wall Street Journal, "An ESG Champion Stumbles," September 22, 2022
- ↑ Note: This text is quoted verbatim from the original source. Any inconsistencies are attributable to the original source.
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