TOM WARD - Feel-good investing flops

TOM WARD - Feel-good investing flops

There's a new chink in the armor of politically correct investing – also known as ESG – and it comes to us from, of all places, California.

Why should you care? Because if you pay taxes in Rhode Island, you overpay taxes. And if we keep allowing ESG to unduly influence the investing decisions of General Treasurer Seth Magaziner and his panel of advisers, state pension fund returns could suffer, as they have in California.

What is ESG? It is the investment style growing in popularity among left-wing politicians. It applies "Environmental, Social, and Governance" standards to the companies they look to invest in. On paper, it could be a good thing. Invest only in companies that "do good" for society, and hold them to higher standards of conduct.

What's not to love? Your flat-lining, no COLA (annual cost-of-living adjustment) state pension check, that's what.

This "feel-good" investing of your money may not be earning as high an investment return as it should. And when that happens, Rhode Island pensioners remain far, far away from a return of their COLAs. Good investment returns are "free money," and we should capture as much of it as possible.

Politicians will tell you a different story, that returns have been good with ESG investing. And they are OK. But isn't it possible that returns have been artificially pumped up at least in part because all the politicians are investing billions in the same companies? Of course!

Now mind you, I don't care if an individual invests with an eye on ethical behavior by the big shots in charge. It's an honorable act. New funds are available to individuals. But if your fund flops, it's your problem, not mine. When the state pension fund flops, it's everybody's problem.

The "chink" came recently when Jason Perez, a sergeant in the Corona, Calif. police department, upended Priya Mathur, who is, according to Barron's, "a 15-year Calpers veteran who was also board president and champion of Calpers' focus on ESG investing." (Calpers in the massive $351 billion California state pension fund). So, a cop knocked off the Calpers president, who was a big feel-good investor of his money.

Said Perez to Barron's, "Calpers social investment focus and lack of (good) returns received a lot of attention of labor up and down the state...everyone noticed the performance and (Calpers) desire to concentrate on social issues."

In other words, cops like Sgt. Perez knew they were probably going to have their pensions cut in the future, his money lost on the altar of political correctness.

What companies won't politicians (generally Democrat liberals and progressives) invest in? Cigarettes, for one. And "Big Oil," as in fossil fuels. While nobody likes cigarettes (and I don't), the fact is that conflicted and greedy state governments love the tax money cigarettes generate. More importantly, cigarettes are hugely profitable. According to Barron's, Calpers "exit from some tobacco stocks in 2000 reduced portfolio returns by $3 billion between 2001 and 2014."

That's $3 billions pensioners won't have – or taxpayers will be asked to make up – because social engineers, guided by feelings, were put in charge. With the left it's always the same – "Please judge our good intentions, not our crummy outcomes."

Why should we care 3,000 miles away? Because here, state retirees already have lost their COLAs. Their return is far off. When Treasurer Gina Raimondo enacted pension reform, the state pension account had a 60 percent funding ratio. She promised a COLA return when the ratio improved to 80 percent. Today, it's down to 53 percent, after years of a bull market! Results stink!

For the good of all Rhode Islanders, especially our retirees and those in state pension plans, Magaziner needs to give up the folly of "feel-good first" investing and bring adults into the room.

And for the record, all of this "betterment" would have happened had we elected Michael Riley as Treasurer Tuesday, but we didn't. We never do. And so all of us – including the union laborers urged to vote Democrat – will eventually get burned. None of this makes sense.

Ward is publisher of The Valley Breeze

Comments

On how long the majority of the electorate of this State can be so gullible for so long and so often! Decades I believe.

Their inability to understand what exactly their actions are doing will cost us all dearly. Then again, it won't change their ways for they, "no not what they are doing." It's beyond their comprehension.