It’s Easy To Make Oil Companies ESG

Link: https://www.bloomberg.com/opinion/articles/2023-07-12/it-s-easy-to-make-oil-companies-esg#xj4y7vzkg

Excerpt:

You can do this with anything! Absolutely anything:

  • Horrible Coal Inc. wants to raise money.
  • It sets up a special purpose vehicle, Hypertechnical Investments Ltd.
  • Horrible Coal issues bonds to Hypertechnical Investments.
  • Hypertechnical issues its own bonds to ESG funds: “We are just a little old investment firm, just two traders and two computers, no carbon emissions here! And our credit is very good, because we have no other liabilities and our assets are all investment-grade bonds. ‘Which investment-grade bonds,’ did you ask? Sorry, I’m not sure I heard you right, you’re breaking up. Anyway we’ll look for your check, bye!”

Though my made-up names are silly, and in the actual Aramco case one of the not-an-oil-company SPVs is named “GreenSaif Pipelines Bidco.” “Pipelines” is right in the name! The only way you would think that GreenSaif Pipelines Bidco “had no direct links to the fossil-fuel industry” is if (1) you started reading the name but stopped after you got to the “Green” part (plausible!) or (2) you never read the name at all, never thought about it, just looked at the balance sheet and saw only shares of stock, not pipelines or oil wells, and said “ah, stock, well, that’s green enough.”

Author(s): Matt Levine

Publication Date: 12 July 2023

Publication Site: Money Stuff at Bloomberg

Minority- and Women-Owned Business Enterprise: Asset Management and Financial Institution Strategy Report

Link: https://www.osc.state.ny.us/files/reports/special-topics/pdf/mwbe-fiscal-2022-23.pdf?utm_content=20230610&utm_medium=email&utm_source=weekly+news

Graphic:

Excerpt:

In the 2022-23 fiscal year, the Fund recorded growth in its investments with MWBE managers. Despite increased market volatility from the banking disruptions to small financial institutions and the regional banking system and the rise in interest rates, the Fund has continued its steady deployment of capital to MWBE investment managers. As detailed in the tables below, total investments and commitments of Fund capital to MWBE partners for 2022-23 was $31.5 billion.

….

While Fund management is very pleased with these results, our team is committed to retaining our long-term focus on steady, incremental growth, partnering with successful MWBE managers. The 2022-23 results illustrate another important measure of the success of the Fund’s MWBE Strategy. Of the approximate $141 billion of the Fund’s assets that are actively and externally managed, 22.3 percent is managed by MWBEs.

Author(s): Comptroller Thomas P. DiNapoli

Publication Date: May 2023

Publication Site: Office of the New York State Comptroller

ESG tug-of-war leaves taxpayers shortchanged

Link: https://thehill.com/opinion/finance/4028654-esg-tug-of-war-leaves-taxpayers-shortchanged/

Excerpt:

The whole ordeal picked up steam years ago with efforts initiated by progressives in states like California, which has repeatedly imposed politically motivated restrictions on its largest pension funds, CalPERS and CalSTRS. In 2000, the state forced the funds to divest from tobacco companies, a move that cost nearly $3.6 billion in investment earnings. The pension funds have faced frequent — and occasionally successful — demands from activists and legislators on the left to divest of other progressive bogeymen, like firearms, oil and gas, and private prisons.

These politically motivated demands to place social goals above the fiduciary responsibility to pensioners persist, not just in California but also in MaineVermontMassachusetts and many other blue states. At a time when many state pension funds are facing enormous fiscal imbalances, these policies are worsening the problem and shifting massive burdens onto taxpayers, who will have to foot the bill for the progressive aims of policymakers.

Indeed, research shows that putting social policies ahead of fiduciary responsibility can come at a hefty cost. A study found that public pension funds with ESG investment mandates have investment returns that are 70 to 90 basis points lower than those that do not — meaning retirees are financially hurt by these investment strategies.

Not to be outdone, conservatives in red states have been fighting back with anti-ESG policies of their own. Unfortunately, rather than establishing an environment that ensures taxpayers are best served, many of these policies elevate conservative cultural preferences above fiscal considerations. Like the pro-ESG policies of the left, these anti-ESG policies have cost taxpayers considerably.

Author(s): Brandon Arnold

Publication Date: 1 Jun 2023

Publication Site: The Hill

CalPERS Chief Investment Officer Musicco and Son in NBA Playoffs Courtside Seats Next to Billionaire Warriors Owner and Kleiner Perking Partner Joe Lacob. What Gives?

Link: https://www.nakedcapitalism.com/2023/05/calpers-chief-investment-officer-musicco-and-son-in-nba-playoffs-courtside-seats-next-to-billionaire-warriors-owner-and-kleiner-perking-partner-joe-lacob-what-gives.html

Excerpt:

CalPERS’ sense of privilege knows no bounds. The latest example is its Deputy Executive Officer, Communications & Stakeholder Relations Brad Pacheco unsuccessfully trying to ‘splain the very bad optics of Chief Investment Officer Nicole Musicco and her son getting NBA courtside playoff seats that are not available for purchase.

Even if Musicco was careful enough to have her receipt of these seats laundered through the box office, the pretense that a member of the general public could buy these seats is an insult to the intelligence of sports fans all over America.

….

Now one could argue that assuming Musicco bought the ticket, it’s still a sign of bad judgment for her to have gotten a courtside seat at a prized playoff game, the sort normally reserved for the connected and famous, and not state employees.2 But sports enthusiasts, season ticket resellers, and sports insiders all say no way, no how could Musicco have obtained these tickets, whether nominally purchased or not, without connected insiders making them available to her.

….

But aside from the decidedly bought-and-paid-for look, does Musicco winding up with these seats amount to a corruption problem under California law? If you read the relevant provisions with care, the answer is yes.

Musicco is at a level in the California government where she is required to make annual disclosure of outside income and her assets through a Statement of Economic Interests, more informally called a Form 700 (here is Musicco’s current Form 700). Form 700 filers are only allowed to receive a maximum of $590 in gifts from each source per year.

….

But rest assured Musicco would not have been able to collect this perk merely as a former partner in a sports-investment-happy fund; it is her status as current CalPERS Chief Investment Officer that makes her a celebrity-equivalent.

And keep in mind that celebrity treatment, normally kept well out of the public eye, is the norm in private equity. We’ve repeatedly discussed the soft corruption of government employees getting lavish perks like trips to attractive destinations with the fund manager providing lavish entertainment (such as the Stones and Elton John for the biggest funds) and meals, all charged to the fund, meaning the investors, meaning ultimately taxpayers. Here’s a recent indiscreetly-shared example from LinkedIn, of a sumptuous banquet at Westminster Abbey, of an annual meeting for Coller Capital, one of the largest private equity secondary investment firms (i.e., they buy the existing interests of limited partners). For once, enough gold to make even Donald Trump happy!

With that largess as not unusual, no wonder Musicco has come to see special treatment as normal.

Regardless, California takes an indulgent posture toward CalPERS, ignoring sins like cooking its books and covering up employee embezzlement.7 Remember, even in its pay to play scandal, where former CEO Fred Buenrostro was caught taking paper bags of cash, it was the Department of Justice,not the California Attorney General, that successfully prosecuted him, resulting in a four-and-a-half-year prison sentence. Even though the general public will take offense at the latest chicanery, CalPERS’ status in California as too big to fail apparently means it is too big to be disciplined.

Author(s): Yves Smith

Publication Date: 18 May 2023

Publication Site: naked capilism

NYC pension funds lose $2M in failed First Republic, Signature banks

Link: https://nypost.com/2023/05/20/nyc-pension-funds-lose-2m-in-first-republic-signature-banks/

Excerpt:

City pension funds had almost $2 million invested with First Republic and Signature banks — losing it all when both banks failed this year.

The losses were contained in new data The Post obtained from the city Comptroller’s office under a Freedom of Information Law request.

Though a federal bailout rescued bank depositors, the city’s pension cash had been invested in bank stocks and bonds.

“The overall loss is negligible in the context of the daily market motions of our $240 billion pension funds,” said Chloe Chik, spokesperson for Comptroller Brad Lander.

All five city pensions funds were hit in the bank failures.

Author(s): Jon Levine

Publication Date: 20 May 2023

Publication Site: NY Post

CalPERS and CalSTRS Know Fossil Fuel Divestment is a Recipe for Disaster

Link: https://alec.org/article/calpers-and-calstrs-know-fossil-fuel-divestment-is-a-recipe-for-disaster/

Excerpt:

In the Golden State, the California State Teachers’ Retirement System (CalSTRS) and the California Public Employees’ Retirement System (CalPERS) are waking up to the fact that divestment hurts retirees and taxpayers.

CalPERS and CalSTRS are two of the largest pension funds in the country (by both membership and portfolio size). As California Senate Bill 252, a bill calling for fossil fuel divestment from public retirement systems in California, continues to move along in committee, CalPERS and CalSTRS have publicly opposed the bill because it conflicts with their duties as pension plan managers.

As ALEC VP of Policy Lee Schalk and I mentioned in our OC Register column last month, politicized investment strategies are a recipe for disaster. Research from Mike Edleson and Andy Puzder found that ESG investing yields lower returns than investing without political constraints. Additionally, researchers at Boston College found that ESG has failed to achieve its stated social goals.

Both CalPERS and CalSTRS realize that divestment hampers their ability to put members’ retirements benefits first, and the research shows divestment does not achieve its stated social goals. 

Author(s): Thomas Savidge

Publication Date: 28 April 2023

Publication Site: ALEC

NGO Study IDs Vanguard, BlackRock as Big Climate-Change Villains

Link: https://www.ai-cio.com/news/ngo-study-ids-vanguard-blackrock-big-climate-change-villains/

Excerpt:

Guess who the largest investors in climate-harming energy companies are? That would be major asset managers, with BlackRock and Vanguard Group the biggest offenders. So says an environmentalists’ report, “Investing in Climate Chaos.”

The report, spearheaded by Urgewald, a German environmental group, and conducted “in partnership” with more than 20 other nongovernmental organizations, comes down hard on two financial service stalwarts in particular: Vanguard, the mutual fund powerhouse, and BlackRock, the world’s largest asset manager.

Beyond those two, half of the stakes in fossil fuel companies identified in the report are held by just 23 investors. What’s more,18 of them are U.S.-based, the advocacy group stated, basing the report on data collected in January.

….

BlackRock has positions in oil and gas companies that account for two-thirds of the world’s yearly hydrocarbon production, per Urgewald. Its single largest energy holding is also Exxon, which is the firm’s ninth biggest equity position overall. . Although the asset manager has a policy against investing in any business that gets at least one-quarter of its revenue from coal, the report charged that BlackRock exempts power companies that use coal. “As a result, BlackRock remains the world’s largest investor in coal developers,” it said.

….

In the past, BlackRock has responded to critics on the right and the left by saying that, while it supports ESG, is not about to “dictate how clients should invest.” In a statement, it declared that “transition to a low carbon is in the interest of realizing the best long-term financial results for our clients.” 

Vanguard, also under GOP attack, has made much the same argument. It did raise environmentalists’ ire last year when it quit the investment-industry initiative on combating climate change, saying it wanted to “speak independently on matters of importance to our investors.” Some contended that Vanguard was just knuckling under to politicians’ pressure.

Author(s): Larry Light

Publication Date: 25 Apr 2023

Publication Site: ai-CIO

Nevada Bill Marks Third Try at Establishing State-Sponsored Retirement Plan

Link: https://www.ai-cio.com/news/nevada-bill-marks-third-try-at-establishing-state-sponsored-retirement-plan/

Excerpt:

Nevada State Senator Dallas Harris is hoping the third time is the charm and has introduced a bill to create a state-supported retirement plan after two previous attempts by the legislature died on the vine.

The bill, SB305, would create the Nevada Employee Savings Trust, which would be directed by a board of trustees with the power to establish a retirement savings program and automatically enroll private employees who do not have a retirement savings plan available via their workplace. To be enrolled, an employee would need to be at least 18 years old, have worked at the same place for 120 days and have wages that are allocable to the state, although employees would be allowed to opt out.

….

The current bill stipulates that the board is required to establish one or more investment funds and that the underlying investments of each fund must be diversified “so as to minimize the risk of large losses under any circumstances.” The board also may, at any time, add, replace or remove any investment fund.

 The underlying investments may include shares of mutual funds, exchange-traded funds, publicly traded equity and fixed-income securities, as well as other investments available for investment. However, the investment funds would be prohibited from investing in any bond, debt instrument or other security issued by the state of Nevada.

Author(s): Michael Katz

Publication Date: 24 Apr 2023

Publication Site: ai-CIO

Recent SEC Proposals to Come Under Scrutiny of Financial Services Committee

Link: https://www.ai-cio.com/news/sec-recent-proposals-to-come-under-scrutiny-of-financial-services-committee/

Excerpt:

The House Committee on Financial Services will hold an oversight hearing on the Securities and Exchange Commission next Wednesday and Chairman Gary Gensler is expected to testify. The SEC’s proposed budget and their recent proposals, especially the climate disclosure proposal will all likely be discussed.

The SEC requested $2.436 billion for 2024, an increase of $265 million from this year primarily to hire new staff. The new hires are proportionally concentrated in the Divisions of Risk Analysis and Investment Management, whose staffs would increase by more than 5% each. The largest aggregate staffing increase would be to the Division of Enforcement, from its current 1,505 positions to 1,558.

…..

Womack also suggested that the SEC’s proposal on climate disclosure, which would require entities registered with the SEC to disclose their carbon emissions, was not within the SEC’s legal authority, a concern shared by several other Republican members of the committee.

The climate disclosure proposal has been a sensitive issue for agricultural interests. Representative Ashley Hinson, R-Iowa, emphasized the potential impact of this rule on farmers at the hearing. She said that this proposal would be bad for farmers in her state who would have to collect and disclose their emissions data to issue securities and to work with larger businesses who must collect emissions data from their value chain.

Representative Michael Cloud, R-Texas, shared this sentiment during the hearing and said that any issuer subject to Scope 3 disclosure would compel farms in their supply chain to collect this data, a tedious process, which might reduce farmer’s access to credit if they do not comply.

Author(s): Paul Mulholland

Publication Date: 12 April 2023

Publication Site: ai-CIO

New York Common Commits $1.3 Billion to Sustainable Program

Link: https://www.ai-cio.com/news/new-york-common-commits-1-3-billion-to-sustainable-program/

Excerpt:

The $242.3 billion New York State Common Retirement Fund has committed $1.3 billion to two funds as part of its Sustainable Investments and Climate Solutions program. It also earmarked more than $600 million to alternative investments in February.

The pension program committed $1 billion to funds tracking the MSCI World ex USA Climate Change Index, which overweights companies expected to benefit from the transition to a low-carbon economy and underweights companies facing greater climate change risks. A company’s carbon intensity, climate risk management, potential stranded assets, physical risk exposure and development of climate solution products and services are the key factors assessing these rankings.

….

Finally, within the pension fund’s emerging manager program, which invests in newer, smaller and diverse firms, $15 million was allocated to the Empire GCM RE Anchor Fund, which will focus on creating and acquiring industrial outdoor storage in the Netherlands, Germany and Sweden.

Author(s): Michael Katz

Publication Date: 10 April 2023

Publication Site: ai-CIO

State Pensioners Can Learn Lots From Rhode Island And Ohio Teachers

Link: https://pensionwarriorsdwardsiedle.substack.com/p/state-pensioners-can-learn-lots-from

Excerpt:

Finally, and most important, this month there is an election for one active, or contributing member seat on the STRS board—the outcome of which will be determined in early May. If the reform coalition candidate wins this seat, it’s likely control of the board will shift. Then the concerns of the state auditor and reform-minded members will be addressed regarding the need to restore transparency, lower investment fees paid to Wall Street, improve investment performance and move toward restoring benefits previously promised. If so, STRS Ohio’s participant-driven reforms may serve as a template for all of the nation’s public pensions. (On the other hand, if our request for public records is granted by the Ohio Supreme Court later this year—and court-ordered transparency ensues—there may be little need for board action because any mismanagement or wrongdoing will have been exposed to the public.)

But here’s the big picture: Since all public pensions in America have moved like a herd, pouring over $1 trillion into many of the same high-cost, high-risk secretive alternative investments, if any single state pension—such as Rhode Island, or Ohio STRS—restores full transparency and releases alternative investment information to the public revealing widespread industry abuses and violations of law, all participants in public pensions which have also invested in these funds, as well as taxpayers, will benefit. One obscure pension fund board vote in Ohio could ultimately force the transparency and accountability Wall Street has successfully resisted for decades.

Author(s): Edward Siedle

Publication Date: 11 April 2023

Publication Site: Pension Warriors on substack