Two Republican senators expressed concern that Thrift Savings Plan asset managers BlackRock and State Street Global Advisors are putting ESG and their CEOs’ “left-leaning” priorities ahead of their fiduciary duties when it comes to proxy voting.
In a letter Thursday to Federal Retirement Thrift Investment Board Acting Chairman David A. Jones, Sens. Pat Toomey of Pennsylvania and Ron Johnson of Wisconsin questioned the priorities of BlackRock and State Street Global Advisors, who between them manage nearly $500 billion for the $762.3 billion Thrift Savings Plan’s 6.2 million federal employees and members of the uniformed services. Of that, roughly $57 billion is managed by SSGA.
“We are concerned that BlackRock and SSGA may be prioritizing their CEOs’ personal policy views over retirees’ financial security,” the letter said.
A dónde va mi pensión (Where is my pension going?), an investigation by the Press and Society Institute, IPYS, the Pulitzer Center and 13 news organizations, revealed that workers from nine Latin American countries have saved around US$500 billion for their pensions but that they have no idea how and where their money was invested.
The investigation found that in some cases the money ended up in questionable companies that violated local regulations concerning the environment or worker’s safety.
In Chile, for example, 36 companies financed by pension funds accounted for nearly 3,500 fines issued by the labor regulator over the last five years.
Author(s): JULETT PINEDA SLEINAN
Publication Date: 6 July 2021
Publication Site: Organized Crime and Corruption Reporting Project
In what environmental advocates called an important step forward for climate justice, Maine became the first state to commit through legislation to divest from fossil fuel companies after Gov. Janet Mills signed a bill this week.
The legislation, LD 99, sponsored by Rep. Maggie O’Neil (D-Saco), “directs the $17 billion Maine Public Employee Retirement System to divest $1.3 billion from fossil fuels within five years” and directs the state treasurer to “do the same with other state funds,” according to a news release by 350 Maine. The bill was amended to grant the retirement system some flexibility in pursuing a gradual divestment from fossil fuels.
The move comes as momentum for fossil fuel divestment is building around the country, including in states such as New York as well as some cities. All in all, more than 1,300 institutions with a total of $14 trillion in assets have committed to some form of fossil fuel divestment.
Over the past two weeks, activist hedge fund investor Engine No. 1 scored a victory for the climate change movement by wresting three board seats at ExxonMobil with the support of the “Big Three” institutional investment firms BlackRock, Vanguard, and State Street. But the episode also marks a failure in ExxonMobil’s “corporate diplomacy” because of its inability to convincingly demonstrate that it is committed to mitigating climate risks and protecting its long-term business value, according to Wharton management professor Witold Henisz.
Engine No. 1 has only a 0.02% stake in ExxonMobil, but the climate risk issues it pushed for were sufficient to get the three big investment firms on its side. In explaining its stance, BlackRock stated that the energy major needs “to further assess the company’s strategy and board expertise against the possibility that demand for fossil fuels may decline rapidly in the coming decades.” BlackRock CEO Larry Fink had reiterated his company’s commitment to combating climate change in his 2021 annual letter to CEOs; in his 2020 letter to CEOs, he had said that “climate risk is investment risk.”
A proposed mandate to shutter the $5 billion Prairie State coal energy campus and a Springfield, Illinois? plant by 2035 would hit local ratepayers with the double burden of funding new energy sources while still paying down project bonds, a bipartisan group of state lawmakers warn.
Gov. J.B. Pritzker backs a state mandate to end coal generation by 2035 to meet de-carbonation targets included in pending energy legislation. The package stalled during the General Assembly?s spring session that ended last week, but Pritzker said he expects lawmakers will return in the coming weeks for a vote.
Retiring Prairie State early would mark the latest headache for some of the nine public utilities in Illinois, Indiana, Kentucky, Missouri, and Ohio that issued $4.5 billion of debt, some it under the federal Build America Bond program, to finance their ownership in project.
Peabody Energy Inc. initially sponsored the project in Washington County promoting it as an affordable source of energy with an adjacent mine and a cleaner one given its state-of-the-art technology at the time. Bechtel Power Corp. built it. It initially carried a $2 billion price tag that rose to a $4 billion fixed cost under the 2010 contract with utilities but cost overruns drove the price tag up to $5 billion.
Sticking around and backing dissident board candidates worked. Instead of divesting from Exxon Mobil, the US’s biggest oil company, the nation’s three largest public pension funds pursued a successful strategy of advocating for change, and they just helped elect a pair of outside directors. Expect more of this tack against fossil fuel outfits.
Running counter to the trend of pension programs dumping fossil fuel stocks, these giant retirement systems—the California Public Employees’ Retirement System (CalPERS), the California State Teachers’ Retirement System (CalSTRS), and the New York State Common Retirement Fund—believe that, in most cases, working from within is the better way to promote change.
They were key players in electing the two outside directors (a third is still up in the air as proxy ballots are counted), along with huge asset managers BlackRock and Vanguard, plus other pension entities such as the Church of England’s program.
The Canada Pension Plan Investment Board (CPPIB) is hunting for investments in the world’s transition to renewable energy as it aspires to be a global leader in sustainability, the head of the company told Reuters on Thursday.
The pension manager last month announced it was creating a new investment group that would generate investment opportunities in renewables, conventional energy and new technology and service solutions.
CPPIB’s exposure to renewable energy producers rose to C$7.7 billion at March 31 2021, from C$6.6 billion at March 31, 2020, according to a spokesman for the firm.
The New York State Common Retirement Fund (Fund) will restrict investments in oil sands companies that have not demonstrated that they are prepared for the transition to a low-carbon economy, New York State Comptroller Thomas P. DiNapoli, trustee of the third largest public pension plan in the country, announced today.
“As nations around the world become increasingly serious about addressing the threat of climate change and as market forces drive a low-carbon economic transition, we need to make sure our investments line up with this reality,” said DiNapoli. “We have carefully reviewed companies in the oil sands industry and are restricting investments in those that do not have viable plans to adapt to the low-carbon future. Companies responsible for large greenhouse gas emissions like those in this industry, pose significant risks for investors.”
Publication Date: 12 April 2021
Publication Site: Office of the NY State Comptroller
The Fund committed approximately $300 million to Copenhagen Infrastructure Partners IV, a European investment fund that will focus on investments in renewable assets including onshore and offshore wind and solar, as well as climate infrastructure assets that support renewable power.
Additionally, the Fund committed $100 million to Excelsior Renewable Energy Investment Fund I, a North American-focused investment fund that will target investments in renewable power assets such as solar and wind.
Publication Date: 20 April 2021
Publication Site: Office of the NY State Comptroller
A recent analysis by Scientific Beta disputes “claims that ESG funds have tended to outperform the wider market.” Sony Kapoor, managing director of the Nordic Institute for Finance, Technology and Sustainability, a think tank, told the Financial Times that the research “puts in black and white what is only whispered in the corridors of finance — most ESG investing is a ruse to launder reputations, maximize fees and assuage guilt.”
BlackRock’s former chief investment officer for sustainable investing, Tariq Fancy, appears to understand this. He recently wrote in USA Today that he was concerned about portfolio managers exploiting the “E” of ESG investing because “claiming to be environmentally responsible is profitable” but advancing “real change in the environment simply doesn’t yield the same return.” Mr. Fancy criticized “stalling and greenwashing” in “the name of profits.”
This is a tacit admission that ESG investing upends the fiduciary duties portfolio managers owe their clients. As Mr. Fancy acknowledged, “no matter what they tout as green investing, portfolio managers are legally bound” to “do nothing that compromises profits.” As former Labor Secretary Eugene Scalia wrote on these pages last year, under the federal law that protects retirement assets, known as Erisa, “one ‘social’ goal trumps all others — retirement security for American workers.”
On August 4, 2010, Massachusetts passed “An Act Relative to Pension Divestment from Certain Companies that Invest in the Republic of Iran.” The act directs the Massachusetts public pension funds to divest from certain companies “providing goods or services deployed to develop petroleum resources in Iran.”
In an effort to avoid conflict with federal policy, the Massachusetts act has two features. First, it exempts from state divestment “any company” that the US “affirmatively declares to be excluded from” federal sanctions. Second, the act has a sunset provision. The act expires if (1) the US “remov[es] Iran from its list of state sponsors of terrorism and certify[ies] that Iran is no longer pursuing a nuclear capability in violation of its international commitments and obligations,” or (2) the president “declar[es] that [the Massachusetts act] interferes with the conduct of the United States foreign policy.”
The Massachusetts Iran boycott has a long pedigree. In New England and other colonies, the founding generation considered the boycott of English tea and other products to be a wise alternative to war. Prior to the Civil War, Massachusetts abolitionists urged private boycotts of Southern goods. In the 1980s, Massachusetts was one of scores of states and cities to enact divestment and selective purchasing laws regarding South Africa. In 1996, Massachusetts restricted state purchasing from companies doing business in Burma, though the act was later struck down by the Supreme Court. Massachusetts today maintains laws restricting state investment or procurement with Sudan, China, and Northern Ireland.
The commitments are part of New York State Comptroller Thomas DiNapoli’s climate action plan to lower investment risks from climate change and help shift the pension fund to net-zero greenhouse gas emissions within the next 20 years.