Category: Public Pensions

Hong Kong Watch gives evidence to the Canada-China Relationship Committee on ESG investment & country risk analysis

Mary Pat Campbell

Link: https://www.hongkongwatch.org/all-posts/2022/12/1/hong-kong-watch-gives-evidence-to-the-canada-china-relationship-committee-on-esg-investment-amp-country-risk-analysis

Excerpt:

On Tuesday, Hong Kong Watch’s co-founder and trustee, Aileen Calverley, and Director of Policy and Advocacy, Sam Goodman, gave evidence to the Special Committee on the Canada–People’s Republic of China Relationship on the exposure of Canadian pension funds to Chinese stocks and bonds.

Hong Kong Watch has previously written extensively on the question of ESG, business, human rights, and Canadian pension funds exposure to Chinese companies linked to gross human rights violations, including the internment camps in Xinjiang.

In his remarks, Sam Goodman, discussed why China should be considered an ESG investment risk, recommending that:

  • Lawmakers consider sensible regulations to define ESG, label China as an ESG risk, and introduce a blacklist like the USA to restrict investment in Chinese firms with questionable human rights, environmental, and governance credentials.

In her remarks, Aileen Calverley discussed the risk of pension fund investments in China in the event of sanctions, recommending that the Government:

  • Include a China Country Risk Analysis in the Indo-Pacific Strategy.
  • Encourage publicly controlled pension funds to avoid exposure in China.

The full committee hearing can be watched here.

Publication Date: 1 Dec 2022

Publication Site: Hong Kong Watch

FTX collapse is a reminder that public pension systems should avoid high-risk investments

Mary Pat Campbell

Link: https://reason.org/commentary/ftx-collapse-is-a-reminder-that-public-pension-systems-should-avoid-high-risk-investments/

Excerpt:

Public pension plans have mostly avoided direct investments into cryptocurrencies, and for good reason. Public pension benefits are constitutionally protected, meaning taxpayers are on the hook for paying for unfunded liabilities. If a highly volatile investment, such as crypto, were to go sour, the public pension fund—thus, taxpayers—would be on the hook to make up for the shortfall and pay for the retirement benefits promised to public workers. Even though there is a potential upside in generating significant returns by investing in cryptocurrency at the right times, the risks and market swings far outweigh the potential benefits for public pension systems. 

But some U.S. public pension systems are already reporting minor financial losses related to FTX, including the Kansas Public Employee Retirement System, according to the Topeka Capital-Journal:

….

Similarly, “The Missouri State Employees’ Retirement System lost roughly $1 million because a private equity firm it invested in was invested in FTX, the embattled cryptocurrency exchange that filed for bankruptcy last week,” the Kansas City Star reported.

….

Overall, the story of FTX is a cautionary tale for all investors. When it comes to public pension systems, which have largely steered clear of making direct investments in crypto, pension funds should resist the growing pressures to seek higher returns and take on risks that could expose taxpayers to major financial losses and more public pension debt.

Author(s): Swaroop Bhagavatula
Quantitative Analyst

Publication Date: 2 Dec 2022

Publication Site: Reason

Chicago Teachers’ Pension Fund to Reorientate Portfolio to Fully Offset Fossil Fuel Investments

Mary Pat Campbell

Link: https://www.ai-cio.com/news/chicago-teachers-pension-fund-to-reorientate-portfolio-to-fully-offset-fossil-fuel-investments/

Excerpt:

The Chicago Teachers’ Pension Fund trustees in October voted to engage with fossil fuel companies to encourage them towards clean renewable energy sources and investing in viable clean and renewable energy sources to offset the fund’s fossil fuel investments. The fund plans to achieve this goal by the end of 2027.

In a statement shared to Chief Investment Officer, the fund’s CIO Fernando Vinzons wrote, “the fund will approach divestiture from a multi-pronged approach, engaging with current companies to encourage them toward a path of clean renewable energy sources, while working toward the longer-term goal of divesting from publicly traded fossil fuel holdings and investing. Divestment does not attract consensus among institutional investors. Many public pension funds are engaging with companies that produce fossil fuels, some are divesting those companies, and some, as the case with state funds from the state of such as Louisiana, are allocating away from managers perceived to be harming the domestic energy sector by endorsing programs like the Net Zero campaign.

According to a press release from the Chicago Teachers’ pension fund, Carlton W. Lenoir, Sr., executive director at CTPF, commented on the vote saying, “as fiduciaries, our trustees must invest consistent with our mission to protect and enhance the present and future economic well-being of members, pensioners, and beneficiaries, and we are confident that this action fulfills that responsibility.”

Author(s): Dusty Hagedorn

Publication Date: 7 Nov 2022

Publication Site: ai-CIO

Republicans ride ESG backlash to state financial offices

Mary Pat Campbell

Link: https://rollcall.com/2022/11/17/republicans-ride-esg-backlash-to-state-financial-offices/

Excerpt:

Republicans picked up state financial officer positions during the midterm elections amid a campaign against environmental, social and governance investing.

Five positions — in Kansas, Iowa, Missouri, Nevada and Wisconsin — flipped from Democratic to Republican in races for state auditor, controller or treasurer. Of the 50 directly elected positions, Republicans won 29 and Democrats won 19, according to an analysis from Ballotpedia. Two races remain uncalled.

A handful of Republicans’ campaigns for state financial officers focused on ESG, echoing sentiments from GOP officials at statehouses across the country and in Congress who say ESG investing is harming capital markets and domestic energy production and reject the case made by Democrats, major investors and other proponents.

At stake is a suite of legislation and rules that would curb ESG as a material consideration, along with other financial factors, for investors. The proposals include policies for states’ pension funds to divest hundreds of millions of dollars from financial institutions that incorporate ESG — and especially climate — in their investment decisions.

Author(s): Ellen Meyers

Publication Date: 17 Nov 2022

Publication Site: Roll Call

Adjustments in City’s pension plan may take six or more years

Mary Pat Campbell

Link: https://richmondfreepress.com/news/2022/nov/10/adjustments-citys-pension-plan-may-take-six-or-mor/

Excerpt:

City Hall’s 4,200 retirees likely may wait years before seeing another cost-of-living adjustment in their pensions.

In a report to City Council on Monday, Leo Griffin, director of the Richmond Retirement System, projected that 2029 may be the earliest that cost-of-living adjustments are considered for enrollees in the defined benefit pension plan. The defined benefit plan provides a guaranteed pension that depends on the salary earned.

Mr. Griffin’s report suggested the city would be better off waiting until 2033 to consider pension improvements. That is when the system is projected to be fully funded and the city’s yearly

contribution for the pension plan is projected to plummet 81 percent from around $55 million a year to $10 million a year.

Mr. Griffin’s projections assume that the system achieves an average annual 7 percent return on investments.

If that level of return is received, his report indicates that the system would cross the 80 percent threshold of funding in six years – the funding threshold the retirement system has set before any cost-of-living adjustment could be considered.

Author(s): Jeremy M. Lazarus

Publication Date: 10 Nov 2022

Publication Site: Richmond Free Press

Backlash Against ESG Investment Of Taxpayer Money Grows, But Illinois And Chicago Carry On – Wirepoints

Mary Pat Campbell

Link: https://wirepoints.org/backlash-against-esg-investment-of-taxpayer-money-grows-but-illinois-and-chicago-carry-on-wirepoints/

Excerpt:

But those scorned sectors have been the better investments this year, and tech companies have been hammered. Only 31% of actively managed ESG equity funds beat their benchmarks in the first half of 2022, compared to 41% of conventional funds, according to Refinitiv Lipper, as Reuters recently reported. So far this year, 19 of the 20 best-performing companies in the S&P 500 are either fossil-fuel producers or otherwise connected with fossil fuels.

Consequently, ESG funds “have been hit by unprecedented outflows in the market downturn, as investors prioritize capital preservation over goals such as tackling climate change,” wrote Reuters.

Predictably, the issue has become political since state and local officials invest trillions of dollars owned by taxpayers. Republican candidates generally oppose ESG investment of public funds, and five positions — in Kansas, Iowa, Missouri, Nevada and Wisconsin — flipped from Democratic to Republican in recent races for state auditor, controller or treasurer. Of the 50 directly elected positions, Republicans won 29 and Democrats won 19, according to a recent Roll Call report.

Illinois Treasurer Michael Frerichs, however, is among the Democratic officials not backing off on ESG. “We are in it for the long term” is the title of an open letter he recently signed along with 13 other Democratic state financial officers criticizing efforts to stop ESG use of taxpayer money. The letter is astonishingly hypocritical. It says those who want to ban ESG investment of public money are “blacklisting financial firms that don’t agree with their political views.” That, of course, is precisely what ESG does.

Author(s): Mark Glennon

Publication Date:19 Nov 2022

Publication Site: Wirepoints

Ontario Teachers Pension Could Lose $95 Million on FTX Investment

Mary Pat Campbell

Link: https://www.ai-cio.com/news/ontario-teachers-pension-could-lose-95-million-on-ftx-investment/

Excerpt:

Canada’s Ontario Teachers Pension Plan could lose as much as $95 million that it had invested in now bankrupt cryptocurrency exchange FTX.

In October of last year, the C$242.5 billion ($182.9 billion) pension fund announced that it had participated along with 68 other investors in a $420 million funding round for FTX Trading Ltd., which is the owner and operator of FTX.COM. The investment was made through OTPP’s C$8.2 billion Teachers’ Venture Growth platform.

The pension fund says TVG, which was established in 2019 to invest in emerging technology companies raising late-stage venture and growth capital, seeks out innovative companies “that are using technology to shape a better future.”

Although the pension fund didn’t say how much of the $420 million it accounted for at the time of the announcement, it recently disclosed that it invested a total of $75 million during that round of funding in both FTX International and its U.S. entity FTX.US. It also revealed that it made a follow-on investment of $20 million in FTX .US three months later in January.

Author(s): Michael Katz

Publication Date: 11 Nov 2022

Publication Site: ai-CIO

Candidates discuss Illinois’ unfunded pension debt

Mary Pat Campbell

Link: https://www.thecentersquare.com/illinois/gubernatorial-candidates-discuss-plans-to-shore-up-illinois-unfunded-pension-debt/article_d4ee1dcc-5acc-11ed-ba1f-5f5508ee672f.html

Excerpt:

Candidates for Illinois governor are taking different approaches on how they’d tackle the state’s unfunded pension liabilities.

Illinois has among the most unfunded public sector employee pension liability. State numbers indicate around $151 billion unfunded, but some place like the American Legislative Exchange Council place the debt at $533 billion.

State Sen. Darren Bailey, who’s running against incumbent Democratic Gov. J.B. Pritzker, said he’ll use reduced state spending to pay down pensions.

“We’ll find the fat in the budget and we’ll begin to apply that to get this pension situation under control, but first and foremost, I will be sitting at the table with pensioners,” Bailey, R-Xenia, told The Center Square. “I fear that the pension debt may be that large looming problem that will sneak up on Illinois if we continue to ignore it as J.B. Pritzker has.”

Pritzker touts on his campaign website “fully funding pension contributions” as a way to reduce state pension liabilities, “going above and beyond with payments and expanding the employee pension buyout program.”

Pritzker’s campaign did not return requests for an interview.

Author(s): Greg Bishop

Publication Date: 2 Nov 2022

Publication Site: The Center Square

Baltimore City FOP calls adjusted pension requirement ‘egregious privileged class move’

Mary Pat Campbell

Link: https://foxbaltimore.com/news/local/baltimore-city-fop-calls-adjusted-pension-requirement-egregious-privileged-class-move

Excerpt:

 While the City of Baltimore extended the Fire & Police Pension System from a 20-year retirement plan to a 25-year one, a Baltimore City Council committee advanced a bill on Thursday to allow city elected officials to receive pension after eight years, rather than 12 years.

Baltimore City FOP Tweeted Friday saying, “This is one of the most egregious privileged class moves against labor in the history of Baltimore City.”

Baltimore City FOP went on to say the City Council should either vacate this decision, or start the process of returning the Fire & Police Pension System back to 20 years.

Author(s): Emilie Kyler

Publication Date: 5 Nov 2022

Publication Site: Fox 45 News

How Pension Plans Evolved Out of the Great Financial Crisis

Mary Pat Campbell

Link: https://www.ai-cio.com/news/how-pension-plans-evolved-out-of-the-great-financial-crisis/

Excerpt:

A recent webinar held by the National Institute on Retirement Security, in conjunction with consulting firm Segal and Lazard Asset Management, reviewed the report “Examining the Experience of Public Pension Plans Since the Great Recession,” which examines how public retirement plans weathered the period’s market and made subsequent changes to public pension funds to ensure their long-term sustainability.

Most plans recovered their losses between 2011 and 2014, three to six years after the market bottom. Despite the recession and subsequent loss of value, plans continued to pay out over a trillion dollars in benefits to subscribers during the period.

Todd Tauzer, vice president at Segal, says that since 2008, the models and risk assessment strategies of public plans have evolved greatly. Tauzer says, “funding status alone does not indicate health of a public pension, after all, one cannot see the underlying assumptions used. A plan’s funding status can be measured in many different ways, and the ways we measure can change over time.”

“Plans today are on a much stronger measurement of liability than they were 15 years ago,” according to Tauzer. Adjustments to the assumption of the models in mortality, the assumed rate of return, general population counts, and the assumed rate of inflation are a few of the assumptions modified which give greater clarity into pension health post-GFC.

Author(s): Dusty Hagedorn

Publication Date: 17 Oct 2022

Publication Site: ai-CIO

CalSTRS’ board sets science-based emissions goal for 2030 and commits to additional net zero actions

Mary Pat Campbell

Link: https://www.calstrs.com/calstrs-board-sets-science-based-emissions-goal-for-2030-and-commits-to-additional-net-zero-actions

Excerpt:

The board set four initial measures for integrating the net zero strategy across the portfolio, with a specific focus on emissions reductions:

  1. Interim science-based goal. Reduce greenhouse gas emissions across the investment portfolio by 50% by 2030, consistent with the latest findings of the United Nations’ Intergovernmental Panel on Climate Change.
  2. Systematic decision-making process. Adopt processes to incorporate greenhouse gas emissions into investment decisions as part of traditional risk-and-return analyses and their potential impacts on the CalSTRS Funding Plan.
  3. Reduced emissions. Target a 20% allocation of the Public Equity portfolio to a low-carbon index to significantly reduce portfolio emissions while managing active risk.
  4. Integration of climate scenarios. Incorporate future climate-related scenarios into CalSTRS’ asset-liability modeling framework to help guide CalSTRS’ investment allocations.

These actions reflect increasing global momentum toward achieving a net zero economy. CalSTRS will review its net zero goals and strategy annually to adjust for the latest available data, market fluctuations and related scientific advancements.

“CalSTRS’ net zero pledge is rooted in its century-long promise to deliver a secure retirement for California’s hard-working educators and their families,” said Board Chair Harry Keiley. “Taking these interim actions to reduce emissions in our portfolio is a profound step forward and underscores our commitment to considering the impacts of climate change fully and systematically as we manage our fund on every level.”

Author(s): Rebecca Forée

Publication Date: 31 August 2022

Publication Site: Calstrs

New York Announces Historic Fossil Fuel Divestment Plan

Mary Pat Campbell

Link: https://www.nrdc.org/experts/rich-schrader/new-york-announces-historic-fossil-fuel-divestment-plan

Excerpt:

As part of the plan, the Comptroller announced an aggressive schedule of divestment activity over the next four years. This year already, the Common Fund has divested from 22 coal companies. In the next few months, it will divest from companies with tar sands investments. After that, over the next several years, it will divest from these subsectors of the fossil fuel industry:

  • Shale oil and gas firms;
  • Integrated oil/gas majors like Exxon and Chevron as well as smaller integrated companies;
  • All oil/gas exploration and production firms;
  • Fossil fuel service firms, like Schlumberger;
  • And finally, fossil fuel transportation and pipeline companies like Kinder Morgan and Williams.

In addition, the Common Fund is moving forward with two key steps, both supported by the 2018 Decarbonization Panel that was jointly appointed by Governor Cuomo and Comptroller DiNapoli. First, the Fund will hire new staff trained in financial analysis of climate impacts and dangers. And second, the Common Fund will actively vote against board directors of non-fossil fuel companies that do not prioritize climate concerns in alignment with the Fund’s decarbonization goals.

Author(s): Rich Schrader

Publication Date: 9 Dec 2020

Publication Site: NRDC