31 Oct PUBLIC PENSION CORNER, #19
NEWS:
I. NZAMi Tries to Reboot
The Net Zero Asset Managers initiative, has relaunched itself, hoping to salvage its mission by being less doctrinaire in its principles and efforts. After seeing numerous defections over the last year or more, NZAMi suspended its operations last spring:
The Net Zero Asset Managers (NZAM) initiative, a major multi-trillion dollar group of investment managers committed to supporting the goal of net zero greenhouse gas emissions, announced that it will resume operations after pausing in early 2025 to adapt to a rapidly changing political and regulatory environment which had caused some of its largest signatories to exit the coalition.
While the climate-focused investor group announced its return, it also revealed a series of changes to its commitment requirements for signatories, including removing references to investing in line with the goal of reaching net zero by 2050….
NZAM said that it will resume its target and implementation support activities and re-list its signatories on its website in January 2026.
II. EU Votes Down ESG Regulatory Reform
Last week, the European Parliament rejected a reform proposal that would have simplified the EU’s climate change regulations. The EU has been debating reform for most of the last year, conceding that its current regulatory regime will all but certainly render its businesses and investments less competitive in the global marketplace:
Lawmakers in the European Parliament rejected a compromise agreement on forming its negotiating position on the EU Commission’s Omnibus I, which would have seen more significant reductions in the EU’s sustainability reporting and due diligence regulations than those proposed by the Commission, but less than those proposed by right-wing parties.
The agreed position was defeated narrowly, with 309 votes in favor, 318 against and 34 abstentions. The vote sends the Omnibus initiative back to the negotiation stage in Parliament, raising uncertainty for businesses regarding the final outcome, with some lawmakers pushing for reduced reductions to the EU’s sustainability regulations, and others calling for much sharper cuts….
Lawmakers had been sharply divided on the direction of Parliament’s position prior to the agreement, with left-leaning parties pushing for smaller cuts to the regulations, farther-right parties looking to scrap the CSRD and CSDDD altogether.
COMMENTARY
By Stephen R. Soukup, President and Publisher, The Political Forum
“Active vs. Activist”
This past Tuesday, I attended two separate and distinct conferences, participated in two separate and distinct panels, before two separate and (very!) distinct audiences. Despite their differences, both conferences, both panels, and both audiences were essentially focused on the same question: how do we properly, effectively, and faithfully steward other people’s resources?
Thie first panel in which I participated was at the Christian Institutional Investors Conference, which was held at Catholic University of America, and hosted by the good folks at Innovest Portfolio Solutions. The panel – titled “Elevating Standards in Corporate Governance” – featured a group of experts on the topics of governance and active stewardship, people who have dedicated their careers to answering the question posed above. As the panel’s moderator, I had some knowledge of the topic and some idea of where and how to the direct the conversation, but like those in the audience, I also learned a great deal. Proper stewardship requires stewards to be active and informed, as well as perpetually dedicated to the principles they have promised to uphold.
Less than an hour after that panel concluded – across town – I introduced the Public Fiduciary Network panel at the State Financial Officers Foundation Fall meeting. As I say, that panel – which was unofficially titled “Becoming an active fiduciary” – hit on similar themes and produced a similar conclusion: in today’s capital markets, with political pressure being applied from innumerable entities on innumerable aspects of the investment process, being a good and faithful fiduciary/steward requires far more diligence, awareness, and effort than it once did and very often requires the help of outside advisors.
Fittingly, while all of this was going on Tuesday morning, The Center Square – one of the few news organizations that still tries very hard to do actual, factual reporting – broke a story about what happens when fiduciaries are not serious about their responsibilities, when they put politics before duty and their priorities before those of their clients:
The California Public Employees’ Retirement System for state employees lost 71% of its $468 million investment in a clean energy and technology private equity fund, state records show, but CalPERS won’t explain how….
CalPERS committed $465 million to the private equity CalPERS Clean Energy & Technology Fund (CETF) in 2007, ultimately paying in $468,423,814.
Since then, the cash out and remaining investment value of the investment fund has declined to $138,045,373, as of March 31,2025. That’s a loss of 71%, or more than $330 million, for which private equity firms were paid at least $22 million in fees and costs.
No one should be surprised by any of this – not CalPERS’ recklessness, not its unwillingness to be transparent, and not the losses it suffered. Indeed, this is precisely what one would expect from CalPERS, which I described as follows in The Dictatorship of Work Capital:
CalPERS is the largest public pension fund in the country. It is also one of the most aggressively activist and aggressively “green” public pension funds, despite having some $150 billion in unfunded liabilities.
According to a December 2017 report from the American Council for Capital Formation (ACCF), “One key factor behind this consistently poor performance, according to the ACCF report, is the tendency on the part of CalPERS management to make investment decisions based on political, social and environmental causes rather than factors that boost returns and maximize fund performance.”19 The report also noted “that four of the nine worst performing funds in the CalPERS portfolio as of March 31, 2017, focused on supporting Environment, Social and Governance (ESG) ventures. None of the system’s 25 top-performing funds was ESG-focused.”
A big part of the reason that earnest and dedicated fiduciaries must make so much effort today and must work as hard as they do to ensure that they are good and faithful stewards is because of organizations like CalPERS. CalPERS not only puts politics before duty but also insists on everyone else doing the same.
Unfortunately, CalPERS is hardly alone. Even more unfortunately, like-minded organizations are not yet done trying to force everyone else to adopt their political values, despite the history failures like CalPERS’:
Financial risk due to climate-related natural disasters is predicted to rise from the current $7.8 trillion in gross domestic product to $28.3 trillion in 2050, according to a new report by the London Stock Exchange Group. This increased risk exposure will impact approximately 839 million people by midcentury, up from 155 million this year, per the report’s estimates.
What neither the linked article nor the report note is that climate modeling is one of the most notoriously inconsistent and unreliable endeavors in public policy today. Climate models universally miss targets and overestimate consequences, forecasting horrors that never materialize. Nevertheless, the London Stock Exchange Group – and countless others – would like fiduciaries/stewards to ignore this rather salient fact and abandon their traditional duties to engage in dubious public policy.
The good news is that you don’t have to fall for it. As the two conferences and two panels that took place on Tuesday demonstrate, there is help for those who want to understand their duties and who want to be faithful stewards. This is a subject on which many smart people are engaged and are trying to help others.
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