12 Jun PUBLIC PENSION CORNER, #46: Teachers’ Pensions, Politics, and Fiduciary Duty
NEWS:
I. SBTi Releases New Corporate Standards
The Science-Based Targets initiative (SBTi) has released its new corporate net-zero standards, “raising the bar” for how companies should address and report climate change progress:
The updated framework is the SBTi’s most comprehensive corporate climate standard to date. It expands the tools available to companies as they move from high-level climate commitments to practical emissions reduction plans.
For executives, the message is clear. Net-zero targets now need stronger links to capital allocation, transition planning, supply chain action, and annual disclosure. The standard also responds to a core tension in corporate climate strategy: companies operate in different markets, sectors, and policy environments, yet face rising pressure to show credible progress.
The SBTi said Version 2.0 is designed to make science-based climate action “practical, accessible, and relevant for companies at every stage of the net-zero journey.”
II. “Sustainable” Finance Still Doesn’t Do Much (If Anything)
Lisa Sachs, the director of the Columbia Center on Sustainable Investment, has published a new study that purports to explain why “sustainable” finance isn’t doing anything at all about climate change.
A fundamental misunderstanding of how the finance industry operates — and the mandates and constraints of various actors — has helped to delay global climate action and stoke discontent among activists and bankers alike.
That’s a key conclusion of a new paper from Lisa Sachs, director of the Columbia Center on Sustainable Investment. Sachs says the root of a lot of frustration that financial institutions face in trying to cut emissions “stems not from inaction, but from mismatches between objectives, mandates and instruments.”
Sachs identifies three types of climate-related risk. They are planetary risk, which includes physical hazards such as rising temperatures, sea levels, and extreme weather; economic risk, or the reduction of output and impact on public budgets caused by global warming; and, finally, financial risk, which impairs credit quality, portfolio values and balance sheets, and can even threaten the stability of the entire financial system. Not all risks have equal impacts.
COMMENTARY
By Stephen R. Soukup, President and Publisher, The Political Forum
“Teachers’ Pensions, Politics, and Fiduciary Duty”
This week, Consumers Research – “America’s Oldest Consumer Protection Agency” – sent a letter to the Labor Department, asking it to investigate whether the American Federation of Teachers (AFT) has improperly influenced public pension fiduciaries by making political activism its “top priority.” The AFT is the second-largest teachers’ union in the country and is helmed by the famous/infamous activist, Randi Weingarten. Specifically, CR and its Executive Director, Will Hild, wrote that AFT and Weingarten “have supported”:
– Pressure campaigns targeting firearm manufacturers
– Fossil fuel divestment initiatives
– Consumer boycotts against Target over its DEI policies
– Threats of divestment from GM and Stellantis over union demands
In 2025, Weingarten even demanded asset managers divest from Tesla, citing purely political concerns about [Elon Musk], claiming she was “safeguarding workers’ retirements.” (Tesla stock has increased by more than 40% since she made those comments.)
It appears clear to us that union leadership is encouraging teachers and trustees to economically pressure companies that may also be generating returns for teacher retirement systems.
This is a fascinating case, and one that has been addressed elsewhere by Corey DeAngelis, a Heritage Foundation education policy fellow. It is also a very delicate case, the outcome of which will likely hinge on the interpretation of minute details.
To start, it’s important to recognize that Randi Weingarten, the ostensible subject of the CR letter, DeAngelis’s article, and the general frustration with the AFT’s political activities, is NOT a fiduciary. She has no direct control over any of her union’s pension funds, has no authority to buy or sell anything, and is not technically responsible to pension beneficiaries.
At the same time, it’s also important to note that neither DeAngelis nor CR/Hild suggests that she is. In fact, they very carefully argue that her responsibility here is in the influence she wields over the real fiduciaries and the impact that her influence can have and has had on their decision-making. As CR/Hild put it:
Although the AFT does not formally control teacher pension systems, the union openly acknowledges that it actively works to influence pension trustees and investment managers through its Trustee Council and related advocacy efforts. According to AFT materials, more than 50 AFT-affiliated trustees serve on 27 public pension funds, including several of the nation’s largest teacher retirement systems.
The AFT further states that it provides trustees with reports and guidance intended to influence investment decisions involving companies the union considers politically controversial. These activities raise serious concerns about whether union leadership is encouraging trustees to pursue political activism, despite such mixed motives being prohibited by their fiduciary obligations to retirees.
As Hild and DeAngelis point out, pension trustees must act solely in the financial interests of beneficiaries. When Weingarten publicly states that pension funds hold nearly 7 million shares of Target and then couples that with a boycott call, she is using the implied weight of those assets as political leverage, regardless of whether that serves beneficiaries’ financial interests. That is the core contradiction in all of this: union leadership is encouraging economic pressure on companies whose stock those same pension funds hold for return purposes.
While neither Hild nor DeAngelis mentions this, it is also worth noting here that the Department of Labor’s role in this case could be especially germane. The Employee Retirement Income Security Act (ERISA) (which is governed by Labor’s Employee Benefit Security Administration) defines a fiduciary functionally, i.e., anyone who “exercises any discretionary authority or discretionary control” over plan management or assets, or who “renders investment advice for a fee or other compensation,” is a fiduciary, regardless of title. Under that standard, one could argue that Weingarten’s systematic coordination of trustees through the Trustee Council, combined with the AFT’s production of investment guidance documents, looks a lot like rendering investment advice to plan fiduciaries through an organized channel.
The catch, of course, is that ERISA doesn’t apply to teacher pension plans, which are, instead, governed by state fiduciary laws. So, technically speaking, the “functional fiduciary” rule doesn’t apply to Weingarten directly. All of that notwithstanding, there may be an indirect connection to this case. The ERISA functional fiduciary standard is frequently cited as persuasive authority in state-level fiduciary litigation, which means that if a state AG or a pension beneficiary were to challenge a trustee’s politically motivated investment decision, the ERISA functionality test would likely be the blueprint for the case they would make.
Now, to be clear, Weingarten is likely aware of all of this and has taken care to frame her arguments against the companies in question in financial-risk language: “reputational risk,” “long-term investment risk,” “stranded assets.” She presumably expects that this will give her – and any pension fiduciaries who follow her lead – legal cover.
She may not, however, be so lucky. Through its executive order on proxy advisory services, the Trump administration has already directed the Labor Department to consider classifying proxy advisors as ERISA investment-advice fiduciaries on the theory that their recommendations effectively control how trillions in retirement assets are voted. The same logic could, at least in theory, be applied to Weingarten and AFT’s Trustee Council.
In other words, unions’ ability to affect corporate behavior could be severely curtailed here. If Labor takes up CR’s request, or if state AGs launch their own investigations, Randi Weingarten’s days of threatening companies for political purposes may soon be over.
