Just as anticipated, the investment committee of the largest public pensions system in the United States formally voted to reject the policy of divestment, opting in favor of using constructive engagement with the companies that the $310 billion fund is invested in.
The new policy boldly dismisses the tactic of divestment, which has been proven to be both ineffective against the targeted companies and damaging to the long-term health of portfolios attempting such a practice. The new policy adopted by CalPERS states:
Divesting appears to almost invariably harm investment performance, such as by causing transaction costs (e.g., the cost of selling assets and reinvesting the proceeds) and compromising investment strategies.
The move by CalPERS is reflective of decisions made by other pension management officials throughout the country, who have negatively assessed the effects of ideologically-driven investment. Earlier this year, Vermont State Treasurer Beth Pearce asserted that the state could use its pension investment to enact change, after a study found that divestment would put Vermont’s pensions at risk. Former Oregon Treasurer Ted Wheeler called divestment “unproductive” in an op-ed for The Oregonian and touted the Oregon Public Employees Retirement Fund’s (OPERF) “strong leadership” as an active shareholder.
This vote follows many months of intense awareness-raising efforts on the part of Protect our Pensions leaders from California. In May of 2016, Reuben Franco, CEO of the Orange County Hispanic Chamber of Commerce, warned the readers of the OC Register that, “budget shortfalls and underfunded pensions can be detrimental to [minority] communities.” In February, Tim Shaw, Mayor Pro Tem of La Habra, CA, co-authored an op-ed in Governing, which said that, “public pension funds should put pragmatism ahead of dogma,” and reject divestment. Finally, Carlos Solorzano, the CEO of The Hispanic Chambers of Commerce of San Francisco, published an op-ed in the San Francisco Chronicle, which pushed back against divestment bill AB 20, making the case that the legislation will be harmful to businesses in San Francisco and across the state.
Read the full coverage of the vote here.