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Retirement funds for teachers and firefighters are caught in ESG crossfire

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A growing wave of public pension administrators, business associations and labor unions is sending a message to the Republican Party seeking to deregulate the so-called Republican Party. “Awakened” Investing: our money, our choices.

Commonly known as ESG investing, regulatory efforts to block the flow of money into funds that consider environmental, social and governance issues typically target large Wall Street asset managers. Public pensions are now being targeted more and more, as are retirement benefits for teachers, librarians, firefighters and other civil servants.

But while the voices against anti-ESG restrictions are growing, their dissent has not stopped the tide.

ESG Investing — Market Predictions Hit $33.9 trillion globally by 2026, or more than one-fifth of all assets under management — remains loosely defined, some supporters has resisted regulatory efforts Reinforce standards for what is suitable for labeling.Nevertheless, many conservatives have condemned the practice As part of the liberal agenda of activists and trying to limit it.

at least 7 red states A report from Harvard University has introduced or is considering regulations to bar public institutions from considering ESG factors when investing in state resources. Eight states are moving forward with bills and directives targeting companies and banks accused of boycotting investments in oil and gas or firearms.

In Indiana, Texas and Kansas, Republicans introduced bills banning ESG investments in state retirement plans, sparking renewed backlash from labor groups and others.

“These states talk about limited government and free markets, and use government regulations and laws to actually reduce retirement system liability and fiduciary duty,” says Randy Wayne of the Federation of American Teachers. Garten said 1.7 million members. “They are using the government to intervene and undermine the needs of retirees.”

US public pension assets About $5.2 trillion in totalaccording to data from both the National Association of State Retirement Administrators and the Federal Reserve. said it is difficult to estimate how much is invested in

However, state and local pension funds are strong advocates for ESG investing, About 90% of the time in 2021, a resolution to support this practicecompared with 63% of public shareholders, Morningstar researchers found last summer.

Whether ESG investing achieves marketing goals has been debated for years. For example, some major asset managers with large pension holdings, such as BlackRock, have publicly advocated for ESG investing while continuing to invest in fossil fuel companies.

This has been criticized not only by anti-ESG conservatives, but also by proponents calling for stricter, standardized standards.in his year letter to shareholders Last week, BlackRock CEO Larry Fink dropped the term “ESG” entirely, While downplaying climate and energy policy, he said, “For years we viewed climate risk as an investment risk. We still do.”

“But as I have consistently said over the years, it is governments who set policies and enact laws, not corporations, including asset managers, to become environmental police,” he wrote. I’m here.

According to Lisa Sachs, director of the Center for Sustainable Investing at Columbia University, ESG investing does not automatically guarantee sustainability, and its critics tend to misrepresent practices for political reasons.

“The anti-ESG movement is a political show because it creates enemies when they don’t have one to make it look like it’s defending the fossil fuel industry,” she said.

This month in Texas, the heart of the U.S. oil and gas industry, Republican Senator Brian Hughes Suggest adding a pension fund Adds to the list of entities already prohibited from considering social, political, or ideological factors when making fiduciary decisions.

The state has passed a law requiring comptrollers in 2021. keep the list Public companies and funds allegedly involved in boycotts of energy companies, this calls for the sale of all state agencies from publicly traded financial institutions or funds, including certain banks that underwrite municipal bonds.

Criteria for the list include scoring high on indicators of board member engagement on climate risk. BlackRock is on the list, but has publicly highlighted it. $170 billion invested at a U.S. public energy company.

BlackRock requested comment on Fink’s letter.

As Sachs sees it, the energy transition is underway with or without ESG investment, and legislators who blacklist companies involved in its practice are only hurting their own economies. She said limiting the pool of investment options available to pension funds could increase costs and reduce returns for retirees.

“It is firefighters and municipal workers who will really see the financial impact on pension funds as a result of constraints on financial institutions and choices,” she said.

Rick Levy, president of the AFL-CIO union in Texas, said lawmakers run politics on workers’ money. “It is very infuriating that state leaders are targeting an investment firm that seeks to maximize shareholder returns. By that.”

Partisan rhetoric may exaggerate the impact of policies. As a researcher at S&P Global Market Intelligence wrote in OctoberMany states that have banned ESG investments in retirement funds have yet to implement these rules, limiting their practical impact on the activities of fund managers.

Still, several state research agencies say the proposed restrictions on ESG investing could cost pensioners a lot of money.

In late February, the Republican-led Indiana House of Representatives approved the bill This would require the Indiana Public Retirement System and the Indiana Police Pension Trust to exit ESG funds and stop doing business with problematic companies.

A few weeks ago, the Indiana Legislative Service Agency, a bipartisan government agency, released the analysis that concludes the bill. Could cut investment returns for retirees by $6.7 billion Over the next decade, there were discoveries that fueled opposition to legislation.

The Indiana Chamber of Commerce, which has long maintained friendly relations with Republicans, opposed the move. “We will continue to express strong opposition to members of the House of Representatives and key Senators.” group tweeted After the cost analysis is released.

Indiana Chamber of Commerce CEO Kevin Bryneger said he had heard concerns from several members, many of them in the banking industry. The chamber has always believed that markets should function with minimal government interference, he added.

State Rep. Ed DeLaney, a Democratic opponent of the bill, explained that ESG investing is an important tool for weighing all of the potential risks to the performance of a particular asset.

“The basic proposition is that our pensions should not be invested in the most productive way, but for maximum return with minimum risk. It should be invested in a way that protects certain lucrative industries.”

A spokesperson for the Indiana Public Retirement System said it does not consider ESG factors in its investment decisions, saying, “INPRS has and will continue to engage with the Indiana General Assembly regarding the financial impact caused by HB 1008. We will work towards a solution.”

Indiana’s bill mirrors a similar Kansas law recently proposed by a Republican state senator. Protecting Pensions and Corporations Against Kansas Ideological Interference LawAn impact statement issued by the state found that the measure could harm the Kansas Civil Service Retirement System $3.6 billion Returns over the next 10 years. The state retirement system includes pushed back On the other hand.

Kentucky passed a law last year requiring state treasurers to maintain a list of companies that allegedly boycotted energy companies, sparking backlash from Kentucky County’s employee retirement plan. In February, the group said: Do not sell as instructed From ESG holdings, including BlackRock, due to their fiduciary duty to retirees.

Not all public pension funds are fighting for the right to apply ESG principles. Vermont Pension Commission Expressing Concern at Democrat Efforts It’s meant to force the state to sell about $6 billion in pension assets from fossil fuels. Fossil fuels have yielded big gains after the war in Ukraine pushed up energy costs last year.

The ESG battle is also heating up in Washington. on thursday House could not void President Joe Biden’s first veto. In it, he blocked a bipartisan bill that would void a Labor Department rule that would allow some retirement plans to consider his ESG factors.

This article was originally published on NBCNews.com

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