Politics of Sustainable Investing by Public Funds
Sustainable, or ESG, investing – choosing investments based on environmental, social and governance considerations – has been around for decades. But such investing has really taken off in recent years. According to global investment research and management firm Morningstar, assets in sustainable investments grew more than 500 percent between 2006 and 2016, from 3.78 trillion to 22.89 trillion.
Public pension funds have helped fuel that growth, as state and local governments have sought to attract ESG-inclined millennial investors, as well as respond to calls for ESG investments or divestments from some investors. For instance, after the American Federation of Teachers urged teacher pension funds earlier this year to divest from companies that supported private prisons used to house migrants separated from their children at the U.S.-Mexico border, Chicago’s teachers fund did so. Some funds have also faced growing pressure to sell off investments in gun retailers and fossil fuel companies.
Critics argue that sustainable investing places political and emotional considerations ahead of the fiduciary duty to provide the best return for investors. That very argument was used to oust the president of the California Public Employee Retirement System’s board of directors, Priya Mathur, an internationally recognized leader in the sustainable investment community, in October.
Recent research by the Boston College Center for Retirement Research found that ESG funds haven’t performed as well as unrestricted funds, although the center noted that the underperformance was due at least in part to the much higher management fees charged by ESG funds rather than to the performance of the investments themselves.
But Ohio State University law professor Paul Rose makes the case that fiduciary responsibility for public funds extends beyond return on investment. He says such funds also have to consider the fiscal impact of investments on taxpayers, such as whether they will raise government costs for health care or water quality.
“You could create a colorful argument that [certain types of] ESG investing does help taxpayers over the long term,” he said.
Ohio University’s Rose notes that regardless of the type of investments you’re advocating for or against, “You need to be able to demonstrate that you’ve run the numbers.” (GOVERNING, MORNINGSTAR)
Between 2007 and 2012, the number of annual suicide deaths rose by more than 30 percent in eight states, according to analysis of data from the Centers for Disease Control and Prevention by Governing. The largest increase, 69.3 percent, was in Wyoming, which was also the state with the highest suicide rate in 2012, at 29.6 suicides per 100,000 residents. Suicide deaths also increased by less than 10 percent in eight states, including Vermont and Wisconsin, where the suicide rate dropped by 2.2 percent and 0.8 percent, respectively.
