FOR IMMEDIATE RELEASE
May 8, 2019
Pension Funds Should Not be Used as Leverage for Social Movements
The Institute for Pension Fund Integrity hosted a morning breakfast discussion on public pensions, proxy advisory firms, and the ESG investing with all participants ultimately agreeing that “pension funds should not be used as leverage for social movements.”
WASHINGTON, D.C. – This morning at the National Press Club, a panel of experts joined the Institute for Pension Fund Integrity (IPFI) to discuss the relationship between public pensions, proxy advisory firms, and Environmental, Social, and Governance (ESG) principles. The rise in ESG investing and popular scrutiny around what types of industries public pensions profit from has sparked much debate. The tendency of proxy advisory firms to favor proposals with strong ESG components despite their pattern for lower returns raises concerns. IPFI welcomed Congressman Sean Duffy (R-WI-8) as keynote speaker and a panel of experts including Jason Perez (CalPERS), Jeff Mahoney (Council of Institutional Investors), and Dr. Wayne Winegarden (Pacific Research Institute).
Setting the scene, IPFI President Christopher Burnham emphasized the need for a strict adherence to fiduciary responsibility for all investors and those providing investment advice, including proxy advisory firms. Underfunded public pensions cannot afford to sacrifice potential earnings in favor of advancing a political agenda, and the proxy advisory firms that public pensions rely on for proxy voting guidance are actively pushing factors that may ultimately harm company performance, and therefore returns.
Congressman Sean Duffy was then welcomed to the podium to frame the issue from a legislative standpoint. Rep. Duffy had previously sponsored the Corporate Governance Reform and Transparency Act and has been engaging in a bipartisan effort to pass this bill. This legislation, while not as interesting as healthcare or tax reform, is necessary to “bring about more responsibility, accountability and transparency for proxy advisory firms,” said the Congressman.
The panel discussion then followed, discussing everything from the impact of ESG investing to the role of proxy advisory firms. When asked the impact of divestment movements in California, California Public Employees’ Retirement System (CalPERS) board member Jason Perez cited external influences as the primary driving force for divestment from companies with proven substantial returns. He asserted that “public pensions should not be a lever” to further social movements, which all panelists strongly agreed with.
While there was some disagreement regarding the question of applying fiduciary responsibility to proxy advisory firms, the panelists agreed that greater disclosures and transparency would benefit all parties involved. Dr. Wayne Winegarden, Senior Fellow in Business and Economics at the Pacific Research Institute, also argued that it might not be necessary to always vote the proxy, which would be a stark change from today’s understanding of SEC guidelines. This was just one of the lively discussion topics that the panelists covered with all panelists presenting unique view points.
The Institute for Pension Fund Integrity seeks to ensure that local, state and federal leaders are held responsible for their choices in investment, led not by political ideation and opinion but instead by fiduciary responsibility. IPFI is a non-partisan, non-profit organization based out of Arlington, Virginia, and spearheaded by former Connecticut State Treasurer and former Undersecretary General of the United Nations, Christopher B. Burnham.