Andy Kessler’s piece in The Wall Street Journal titled “Stocks Weren’t Made for Social Climbing” accurately described the misguided approach to social investing. He writes, “Profits are the best measure of a business’s value to consumers.” According to a study released earlier this month, pensioners and retirees feel the same. Surveyed pension holders overwhelmingly weighed strong, steady returns as the most important issue in contrast to those who find social causes to be the top priority.
Kessler is accurate to write, “do whatever you want with your money.” However, pension fund managers are not investing their money, but rather, these managers are gambling with the financial future of retirees and public employees. This runs contrary to the fiduciary responsibility that pension managers are beholden.
Pension funds are entrusted to treat fiduciary responsibility above all in deciding stocks to invest. As Kessler notes, “If you don’t like your money where your returns are, someone else will.” If state pension funds recklessly invest with social good will top of mind, the funds will suffer and the environment will be left unchanged as others the stocks will be quickly bought up on the secondary market.