June 17, 2019

HMM: Calpers’ Dilemma: Save the World or Make Money? “California’s public pension system wrestles with new doubts about divestments based on social concerns.”

In the last two years, its directors have opposed proposals to sell stocks in private prisons, gun retailers and companies tied to Turkey because of the potential for lost revenue and skepticism about whether divestment forces social change. One of these directors is now urging the system, also known as Calpers, to end its ban on stocks tied to tobacco, a policy in place since 2000.

“I do see a change,” said that director, California police sergeant Jason Perez, in an interview. “I think our default is to not divest.”

Calpers isn’t the only system wrestling with these new doubts. Rising funding deficits are prompting public officials and unions across the U.S. to reconsider the financial implications of investment decisions that reflect certain social concerns. The total shortfall for public-pension funds across the U.S. is $4.2 trillion, according to the Federal Reserve.

New York state’s Democratic comptroller and unions representing civil service workers oppose a bill in the Legislature to ban fossil fuel investments by the state pension fund. In New Jersey, Gov. Phil Murphy, a Democrat, vetoed legislation last year that would have forced divestment of state pension dollars from companies that avoid cleaning up Superfund sites by declaring bankruptcy.

There is some evidence that divesting from certain holdings can be costly for systems that oversee retirement savings for millions of public workers.

No bailouts.

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