21 Aug PUBLIC PENSION CORNER #53: Why Celebrating (a Little Bit) is Important
No news today, but two announcements (and then commentary)
ANNOUNCEMENTS:
I. Welcome!
Greetings to those of you who are new to the Public Pension Corner (and my apologies for the repetition to those of you who are not).
If you have received this email, then you have been identified by The Political Forum or one of this newsletter’s sponsors as an important decision-maker in state government and/or public pension management.
Each week, the “Public Pension Corner” – a publication of The Political Forum – will bring you the latest and most important news on ESG, stakeholderism, and other issues relevant to the financial stability of public coffers and the fiduciary responsibilities of public officials. Additionally – and most importantly – each issue of the Public Pension Corner will feature the astute commentary and forecasting of Stephen Soukup, who is the Publisher of The Political Forum, a 30-year capital-markets research veteran, an expert in ESG and stakeholderism, and the author of The Dictatorship of Woke Capital and the forthcoming The Dictatorship of Big Capital.
Please feel free to respond to this email with any questions you may have – questions about the newsletter, concerns associated with fiduciary duty, or any matters that seem relevant. Please feel free to forward this to anyone else whom you believe may find it useful.
Finally, please make note of our sponsors, all of whom are and have long been dedicated to helping public fiduciaries meet their obligations fully and transparently.
Many thanks,
The Political Forum
II. The Public Fiduciary Network’s Monthly Webinar
Next Thurday (August 28) at 3:00 PM (EDT), the Public Fiduciary Network will host its monthly webinar, this month, featuring very special guest Jay Rogers:
Jay is President of Alpha Strategies Investment Consulting, with more than 30 years of experience in institutional investment management spanning private equity, private credit, hedge funds, and ultra-high-net-worth wealth management. He serves as an expert witness in securities and fiduciary litigation and is a guest lecturer at the USC Marshall School of Business. His writing on fiduciary duty, public pension governance, and ESG and DEI investment mandates has appeared in the Wall Street Journal, Washington Examiner, RealClearMarkets, the Sacramento Bee, Capitol Weekly, and other national and regional outlets. He is currently writing The Fiduciary Betrayal, a book examining the erosion of fiduciary standards across American public institutions. Jay holds a BS from Northeastern University and has completed postgraduate coursework at UCLA, the University of Pennsylvania, and Harvard. He has appeared on CNN’s Your Money and is frequently quoted in financial publications including the Wall Street Journal, Bloomberg News, and NPR.
Register HERE.
COMMENTARY
By Stephen R. Soukup, President and Publisher, The Political Forum
“Why Celebrating (a Little Bit) is Important ”
As some of you know, last week, the Committee to Unleash Prosperity published a report on the retreat by major financial organizations from the global climate change architecture. This report, titled “‘Net Zero’ Climate Change Movement Is Officially Dead,” was co-authored by CTUP’s Steve Moore, yours truly, and Jerry Bowyer, the CEO of Bowyer Research (one of the sponsors of this newsletter). I’d like to discuss, in brief, a couple of aspects of the report that might not seem immediately obvious.
First, this report should be of use to some of you in the public pension arena, especially those of you responsible for public money in states that responded to the initial push for ESG with “no-fly” lists. Indeed, part of this report began as an effort to help states and municipalities understand which banks were most responsive to requests or demands that they stop participating in global alliances that could violate the fiduciary duties of their customers or threaten industries critical to those states. Asset management is a wide-open field, with many managers throughout the country who can and will run large sums of public money. Banking, by contrast, is a little different, and sometimes, the capitalization needs of states and municipalities exceed the reach of local and regional banks. Understanding which of the Big Banks – the national banks – are best positioned to meet the restrictions placed upon public officials by state laws and regulations on ESG-related matters is important.
It’s helpful to know, for example, that Citigroup and Bank of America are still affiliated with Ceres, a nonprofit organization that seeks to eliminate the use of all fossil fuels. It’s helpful to know that Morgan Stanley runs an operation called the Institute for Sustainable Investing and hosts a conference called the Sustainable Finance Summit. It’s also helpful to know that JPMorgan Chase and Goldman Sachs do none of the above. Neither JPM Chase nor Wells Fargo uses either of the two major proxy advisory services (ISS and Glass Lewis) at their asset management arms.
All of this stuff is important, and the CTUP report puts at your fingertips.
Second, and perhaps most pressing for me, some people who share my mission to depoliticize banking and capital markets have criticized the report for being too celebratory, too suggestive that this mission has been accomplished and we can all pack our bags and go home. While I appreciate the criticism and understand why the headline might seem too triumphant, I also think that the critique is mostly mistaken.
The report itself is far more nuanced than a glance at the headline might suggest. The infrastructure that is “dead” is the global climate finance infrastructure, mostly created by Michael Bloomberg and now-Canadian Prime Minister Mark Carney. They created a handful of alliances that were intended to force financial services companies to comply with their political goals. That these top-down, one-size-fits-all alliances have largely been abandoned is reason to celebrate – as is the general change in tone in the ESG/stakeholder debate.
None of this means that the battle is won and that finance is now, officially, “back to neutral.” Not even close. Still, it’s important to recognize that impressive progress has been made. When I became seriously interested in this aspect of the intersection of markets and politics not quite a decade ago, very few of us wanted to be in the fight, and even fewer thought it was a fight that could be won. And while we’re nowhere close to winning and exorcising politics entirely from finance, we’re a great deal closer than almost anyone thought we’d ever be, and we’re moving much of the discussion in the right direction. That’s important to note – and, on occasion, to celebrate.
More to the point, what this report does is help us to understand what has worked over the last five years in pushing back, enabling us to maintain and even to recreate those strategies in different aspects of the fight. The bottom line here is that the politicization of finance is something that was enabled by the centralization and concentration of capital and, by extension, power in a remarkably small number of hands. Given that, the most logical response would be an effort to promote and leverage decentralization and de-concentration. That’s what this report highlights.
Just over five years ago, the State Financial Officers Foundation (SFOF, run then by inimitable Derek Kriefels and run today by the equally inimitable OJ Oleka, and another sponsor of this newsletter) decided that it and its SFOs should be acutely aware of what was happening in financial services. State treasurers and auditors began pushing back on the use of state funds and state pension money to advance goals that were contrary to the interests of their states, their constituents, and their pension beneficiaries. State attorneys general got into the fight as well, and then something funny happened on the way to the Net-Zero Utopia. The states, counties, municipalities, and other public pension funds won. The state SFOs, AGs, governors, and countless others made it clear to the financial services giants that their participation in global climate alliances was incompatible with fiduciary duty, whether exercised on the client or the provider level. And the global climate architecture crumbled.
Others have been equally valuable in fighting back in a strategically decentralized way. Justin Danhof, Scott Shepard, and Stefan Padfield led the way at the National Center for Public Policy Research in shareholder activism on the part of small shareholders looking to avoid top-down politicization of business and capital markets. Danhof carried that mission over to Strive Asset Management, where he also attempted to break the proxy advisory duopoly (and now he’s taken the mission to the Department of Labor’s Employee Benefits Security Administration). The aforementioned Jerry Bowyer picked up where Danhof left off, creating a set of custom proxy-voting guidelines that are politically neutral and undermine the duopoly, as well as ramping up engagement efforts on behalf of shareholders opposed to politics in finance.
In short, the victories won thus far have been won by small players pushing back against the big players, using tactics of federalism and decentralization. Not only are those victories worth celebrating, but they’re also worth emulating.
And that’s the point of the CTUP report.
Again, I appreciate and understand the criticism that it’s too early in the battle against politicization of finance to declare victory. And I agree, wholeheartedly. But that’s not what this report does. It does so much more.
