California pension funds pushed by politicians to divest from gun industry

SACRAMENTO – California’s two major pension funds, the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), control more than $500 billion in total assets, making them two of Wall Street’s most influential investors. They also are government entities, and some California leaders want to use their investment muscle to achieve public-policy outcomes.

This often comes in the form of divestment, by which the funds are encouraged – or even required – to sell their assets in industries that are viewed negatively by the people who push these efforts. These efforts tend to work against the goals of the funds’ professional investment staff, which are charged with getting high investment returns to fund pensions for the systems’ retirees. Both funds have a fiduciary responsibility to maximize their return on taxpayer dollars.

Yet estimates from a consulting firm suggest that CalPERS has lost approximately $8 billion in returns because of previous efforts to divest from coal-related and tobacco industries. That’s become a particularly contentious issue as funding levels have fallen to 68 percent for CalPERS and 64 percent for CalSTRS. That means they have only around two-thirds of the assets needed to make good on all the current and future pension promises made to government retirees.

Despite the troubling numbers, there’s a new push for divestment from some politicians. Following the October massacre in Las Vegas, by which a gunman murdered 59 people at a country music concert, state Treasurer John Chiang has called for the teachers’ fund to sell its assets in weapons firms and sporting-goods companies that sell any guns that are illegal in California.

“Neither taxpayer funds nor the pension contributions of any of the teachers we represent, including the three California teachers slain in Las Vegas should be invested in the purveyors of military-style assault weapons,” said Chiang, a 2018 candidate for governor and member of both pension boards. Chiang also told the Sacramento Bee that he plans on making a similar request to the CalPERS board.

The newspaper also noted that both funds “this year have faced calls to divest from companies that do business with the controversial Dakota Access Pipeline,” which would transport oil underground from North Dakota oilfields to Illinois. It has prompted protests from a variety of environmental and Native American activists.

Critics of these proposals say they are largely symbolic and would do little to influence gun sales or the pipelines. Divestment from these relatively small industries wouldn’t have much impact on the massive funds’ financial returns, either.

On Oct. 30, 12 members of California’s Democratic congressional delegation sent a letter to CalPERS chief executive officer Marcie Frost urging the pension fund to divest from a fund that has acquired a hotel owned by Donald Trump’s organization. This move is more directly political than many divestment efforts, which tend to focus on the social implications of investing in the pipeline, weapons manufacturers, coal-related industries and tobacco companies.

Divestment advocates sometimes argue that these controversial products may be poor long-term investments. For instance, the Public Divestiture of Thermal Coal Companies Act of 2015 and similar efforts by the state insurance commissioner were based in part on the notion that these coal-related companies may face diminishing values as the world shifts away from carbon-based fuels – a point rebutted by those who note that the current price of the stocks already reflects that risk.

But the Trump-related divestment call, led by U.S. Rep. Ted Lieu of Torrance, is designed to target the president. The members of Congress expressed their disappointment that CalPERS “has not divested its interest” in that fund “nor has taken any actions to ensure that its fees are not being transferred to President Trump,” according to their letter. They criticized CalPERS for taking a “wait-and-see” approach toward the matter.

These members of Congress claim that this CalPERS investment could be in violation of the Domestic Emoluments Clause of the U.S. Constitution, which states that “no Person holding any Office of Profit or Trust under them, shall, without the Consent of the Congress, accept of any present, Emolument, Office, or Title, of any kind whatever, from any King, Prince, or foreign State.” This would be an unusual interpretation of an arcane clause.

Meanwhile, the pension funds have been expanding other divestment and socially motivated investment efforts. Last December, the CalPERS investment staff “recommended that the board remove its 16-year ban on tobacco investments in light of an increasing demand to improve investment returns and pay benefits,” according to a Reuters report. But instead of removing the ban, the board “voted to remain divested and to expand the ban to externally managed portfolios and affiliated funds.”

And last year CalPERS adopted a five year Environmental, Social and Governance plan that focuses on socially responsible investing. The fund has long used its financial clout to push companies it invests in to promote, for instance, board diversity and other social goals.

Whatever their chances for approval, the latest efforts are not out of the ordinary. But they will rekindle the long-running debate between political and financial goals, and whether the former imperils the latter given both funds’ large unfunded liabilities.

Steven Greenhut is Western region director for the R Street Institute. Write to him at [email protected]


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  1. Ted Steele DD
    Ted Steele DD 8 November, 2017, 11:43

    Mass shooting are what conservatives seem to like— I mean, they do NOTHING about them– well, ever……more important to look cool with my AR I guess— churches, first graders, movie theater s—-

    MAGA lmao– tired of all this winning yet Trumpaloopas?

    Reply this comment
    • ricky65
      ricky65 8 November, 2017, 14:27

      They do NOTHING about them? Guess you did not notice that an NRA guy with a gun ended this massacre.
      When are you Regressives going to do something about all these ‘truck’ massacres anyway? There’s no 2nd amendment to protect trucks so you guys can ban them if you wish.
      Honestly Teddy, the ‘DD’ after your name must stand for “Demented Democrat.”
      BTW” Does the ‘home’ know you’ve wandered off again?

      Reply this comment
      • ricky65
        ricky65 8 November, 2017, 14:30

        Actually ‘Demented Democrat” is an oxymoron now that I think about it.

        Reply this comment
      • Steele, Ted Rt Rev
        Steele, Ted Rt Rev 8 November, 2017, 15:16

        LOL The NRA ended this massacre??? LMAO— I guess the iceberg ended the Titanic voyage too little buddy! What a pathetic comment.Tell that to the victim’s families.

        Reply this comment
        • ricky65
          ricky65 11 November, 2017, 07:56

          I was thinking of a dignified response to your incoherent post but decided that you are not worthy of one.
          Just more lunatic rantings from a senile old fart.

          Reply this comment
          • T is for Teddy Cakes!
            T is for Teddy Cakes! 13 November, 2017, 09:05

            Poor Ricky—- Oh well– at least you tried— hey here’s a nice Faux News stat— I guess if the hero with a gun didn’t take out the shooter he would have killed all 2,000 people in the town, and maybe folks in the next town?

      • SeeSaw
        SeeSaw 9 November, 2017, 10:06

        Oh yeah….we only have 26 dead instead of hundreds…..

        Reply this comment
    • Tim
      Tim 13 May, 2018, 11:07

      All mass shootings are what the leftists like you live for. It means you get the opportunity to remove other citizen’s rights

      Reply this comment
  2. Ulysses Uhaul
    Ulysses Uhaul 8 November, 2017, 12:35


    Queeg worked the night shift wearing some type of big bulky flak jacket from the Adelanto Army/Navy store or somewhere……it covers way up above his ears. He is not front office material….what do I do?????

    Reply this comment
    NTHEOC 15 November, 2017, 14:19

    I just don’t understand you RAMBO wannabe gun nuts! Why does any joe citizen need an AR15 assault weapon? or 2 or 3 of those types of weapons! Oh ya, the 2nd amendment, the one that was written back in the musket rifle days. Well if we really follow the 2nd amendment can I own a RPG rocket launcher? How can any decent human being accept children and innocent people being killed so they can play commando with their guns. Looks like another one of your poster boys went nuts in northern Cali.

    Reply this comment
  4. Phil
    Phil 19 November, 2017, 09:42

    This is total politician BS. If CALPERS wants to get involved in socially responsible investing they should push for defined contribution IRAs for public employees so the taxpayer is not on the hook for CALPERS obligations. Or they could run the organization so that it is 100 percent funded.
    That would be a greater socially responsible investment legacy to these officers than divesting from profitable gun companies.

    Reply this comment

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Tags assigned to this article:
CalPERSCalSTRSJohn ChiangSteven GreenhutTed Lieu

Steven Greenhut

Steven Greenhut

Steven Greenhut is CalWatchdog’s contributing editor. Greenhut was deputy editor and columnist for The Orange County Register for 11 years. He is author of the new book, “Plunder! How Public Employee Unions are Raiding Treasuries, Controlling Our Lives and Bankrupting the Nation.”

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