Annual Reporting is a Gateway to Divestment

Activists remain focused on politicizing pension funds and jeopardizing the financial future of public servants. By many accounts, these efforts have failed to convince pension funds, university endowments, and other entities from divesting holdings from companies the activists do not agree with.

Across the nation, we have seen a trend towards substituting outright divestment for non-binding annual reports to pension managers, legislators, or other interested parties. A recent example of a bill repurposed from annual reporting is the California Senate Bill 964 (SB 964).

As initially written, Senator Ben Allen’s SB 964 text required divestment of the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) from holdings in energy company companies. The original bill received strong opposition from union heads across the state because of how it would affect recipients of the pension fund and the ability for the fund to maximize its holdings on behalf of its pensioners.

Police Lt. Jim Auck, treasurer of the Corona Police Officers Association, told the CalPERS’ board his department is opposed to such measures. The already massively unfunded pension liabilities are straining the ability to invest in the department and hire new talent because of the need to spend more resources close the liabilities gap. Lt. Auck said, “The CalPERS board has a fiduciary responsibility to the membership to deliver the best returns possible.” Mandating unnecessary annual reporting or consistently calling for divestment pulls away from their responsibilities and creates an unnecessary burden for pensioners.

Following debate and opposition, SB 964 morphed into a new bill as part of the failing divestment movement. The bill now requires a reporting of “climate-related financial risk.” This is a dangerous precedent to set for pension fund management as it once again diverts them from their intended responsibilities and continues to open the door for calls for divestment. Our pension fund systems are already massively unfunded and overstrained. Further politicizing our retirement security for public employees is contrary to the fiduciary responsibility of pension fund managers.  Mandated reporting is simply a watered down consequence of the ill-fated push for pension fund divestment that does nothing for pensioners or retirees.

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