CalPERS exposes taxpayers to unnecessary risks

Listing all the deficiencies of the California Public Employees’ Retirement System would be a daunting task. A long history of corruption involving so-called “placement fees,” dysfunctional governance, undue union influence and poor rates of return are themselves reasons why California needs fundamental pension reform.

Now we can add to that list how CalPERS’s mindless pursuit of progressive, feel-good causes exposes taxpayers to even greater risk.

In a scathing report released earlier this week, the American Council for Capital Formation blamed CalPERS’ poor investment results over the last decade on its increasing focus on “sustainable” investing strategies. Often referred to as ESG policies (environmental, social and governance) this strategy applies subjective opinions in an effort to measure the sustainability and “ethical impact” of an investment in a company or business. Of course, ESG judgments are as malleable as the varying opinions of those judging the criteria. Applying ESG standards as a primary investment strategy is the polar opposite of looking at actual financial performance.

According to the report, “During this time of increased ESG investing and activism, the fund’s performance has suffered, converting a $3 billion pension surplus to a nearly $140 billion deficit over the past 10 years.”

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