In Case You Missed It: The Latest Roundup of Material from IPFI

The Institute for Pension Fund Integrity (IPFI) works to promote sound governance of public pension funds across the United States. At IPFI, we urge pension leadership to prioritize fiduciary responsibility and put fiscal health first when making financial decisions. We encourage officials to carry out sensible and prudent pension management guided by their fiduciary responsibilities. By holding officials and fund managers accountable for their investment decisions, IPFI strives to ensure a secure retirement for millions of American public servants.
See below for a round-up of the latest material from IPFI:
Issue Brief: Behind BlackRock’s ESG Shift
  • BlackRock, the world’s largest private asset manager, has over the past two years begun to shift its investment strategy, placing a much greater emphasis on environmental, social, and governance (ESG) factors and boosting the presence of ESG funds in its portfolios. In a newly released issue brief, the Institute for Pension Fund Integrity delves into the steps that BlackRock and its founder Larry Fink have taken to arrive at this point, and examines the consequences that this shift will have on investments – particularly public pension funds. Read the full report here.
SEC Rulemaking and What It Means for Proxy Advisory Firms
  • “The SEC recently announced proposed rules aimed at addressing the outsized influence of proxy advisory firms, restoring much-needed protections to the proxy voting process and those who bear the financial consequences of the decisions made throughout. The proposed rules stand to correct a number of issues related to proxy advisory firms that compromise the shareholder voting process, company performance, and financial returns on public pension investments.” Read the full report here.
The SEC’s New Rules For Proxy Advisory Firms Are A Key Step Toward Accountability
  • “Our terrific public employees, who are counting on duty, stewardship, and the highest standard of care for the management of their retirement funds, deserve to be protected from individual political agendas, and the return to accountability, transparency, and politics-free management of our public pension funds. Our four state treasurer colleagues are wrong in their injection of politics into pension fund management, and the SEC is correct in their new proposed rules to correct the mistaken interpretation of their 2003 rule.” Read the full article here.
Congress Should Reconsider Banks’ Government Guarantees if the Banks Abuse their Fiduciary Duty
  • “Denying loans to entire industries based on political pressure is an affront to the American taxpayers who have subsidized these institutions. It is especially egregious when it involves money loaned through the Paycheck Protection Program and other COVID-19 relief bills.” Read the full open letter here.
BlackRock’s ESG Strategy Plays Politics with Public Pensions
  • “In a relatively short time, BlackRock has become the largest asset manager in the world. The firm built its impressive franchise as a low-fee, efficient provider of index portfolios. Now, however, Larry Fink, the mortgage-bond trader who founded the firm in 1988 and has been CEO ever since, wants to take BlackRock in a different direction. Why? And what does the shift mean for clients, especially pension funds?” Read the full article here.
As Shareholders Come Together to Vote, Investors Must Work to Keep Politics Out of Public Pensions
  • “BlackRock is a major shareholder in many corporations, and therefore has enormous influence in the voting decisions being made across the market. Due to the enormous amount of power BlackRock wields, investors are pressured to vote along the ideological lines drawn by the firm rather than what will maximize shareholder value in a time when the markets have plummeted in a way not seen since the Great Depression.” Read the full article here.
Activist Banks That Weaponize Lending Power Should Meet Stiff Resistance From Lawmakers
  • “As all states face the toughest of times for their citizens since the great depression of the 1930s, is this really the time to violate fiduciary duty and play politics with bank assets and policies? Both Congress and the Executive Branch should take swift action to ensure that federal relief programs like the Paycheck Protection Program do not become pawns in a dangerous game of discrimination being played by some banks.” Read the full article here.
Proxy Firms’ Social-Ills Advice Wrongheaded
  • “Across the country, nearly 3,000 public-pension plans provide retirement and disability benefits to over 350,000 career fire service and EMS employees. But chronic under-performance and unfunded liabilities in our public pension systems continue to intensify. Meanwhile, institutional investors have become increasingly reliant on proxy advisory firms to guide them on votes affecting company performance and returns on our pension investments.” Read the full article here.
IPFI Statement on the Proposed Department of Labor Rule on ESG Investing
  • “We at IPFI applaud the Department of Labor’s efforts to clarify and correct guidance on the fiduciary obligations of pension fund managers as far as ESG investing is concerned, and we believe that ERISA must be modernized to ensure that fund’s investment strategies remain focused on fiduciary duty and the best risk adjusted return.” Read the full statement here.
From the Blog:
Robo-Voting: An Overview
  • “When undertaken in a responsible manner, proxy voting is considered to be a key aspect in the effectiveness of capital markets – the SEC itself has said as much in the past. However, this is not the case when the reach and influence of proxy advisory firms has extended far beyond their stated role as straightforward providers of data and analysis.” Read the full article here.
Alternative Investments: An Overview
  • “In 2006, alternative assets made up just 11% of state pension investments. By 2016, that number had shot up to 26% of pension fund allocations. These investments almost entirely came out of what had previously been allocated to traditional equity investments, with fixed income sources’ share of pension fund investments remaining largely unaltered.” Read the full article here.
Equal Accountability Needed for All Companies Listed on U.S. Exchanges
  • “Recently, lawmakers from both parties have increased their scrutiny of many Chinese companies listed on U.S. financial exchanges, noting that they have not been subject to the same level of oversight and regulation as companies from the U.S., or, for that matter, anywhere else in the world.” Read the full article here.
BlackRock Under Increased Scrutiny as it Continues to Push its ESG Goals
  • “Money has always bought power in Washington—and BlackRock certainly has money—but turning to a company that has so publicly stated that their top priority is no longer delivering value to its clients during a time of crisis is cause for concern.” Read the full article here.
Supreme Court Weighs In on Fiduciary Duty in Pension Fund Management
  • “The ruling in Thole vs US Bank N.A. has serious implications for pensions. New uncertainty surrounding the financial situation of current retirees could influence their decisions about how to retire. Regarding defined benefit pension plans, like the ones Thole and Smith were receiving benefits from, this ruling seemingly allows for heavy losses that could potentially permanently damage the plan, or even push it into closure.” Read the full article here.
California Supreme Court Examines Pension Spiking
  • “In May, the California Supreme Court heard a case with the potential to set a new precedent for pension reform across the country. The court’s decision will impact the pensions of over one million public employees and will either confirm or limit the government’s ability to adjust pension benefits after they are promised to public employees.” Read the full article here.
CalPERS Rethinks Investment Strategy in the Wake of the Economic Downturn
  • “The Chief Investment Officer of the California Public Employee’s Retirement System, Ben Meng, is repositioning the fund’s investments in the wake of recent underperformance caused by COVID-19.” Read the full article here.
In the coming months, IPFI will continue to assert its four core principles:
  •  Adherence to fiduciary responsibility
  •  Balanced economic, social and governance (ESG) factor investment
  •  Long term pension fund returns
  •  Data driven investment
Keep an eye on our twitter feed for the latest as we roll out new research and highlight ongoing developments.