Lawmakers Look to California Retirement Funds to Protest Trump

In the 1980s, California effectively withheld investment in South Africa to pressure leaders there to drop its apartheid policy. Now, the nation’s largest public retirement fund is facing a similar pressure aimed at protesting President Donald Trump.

The California Public Employees’ Retirement System (CalPERS) is huge, valued at more than $300 billion. Decisions on where to put its money give CalPERS potentially large leverage with companies and industries.

Democratic Assemblyman Phil Ting has introduced a bill that would encourage CalPERS and the State Teachers Retirement System to divest from companies involved in the construction of a wall along the Mexican border. Ting says the reasoning is simple.

“These are corporations and corporations respond to money," he says. "These are two of the largest investors in the world and that’s one of the only ways I think they would get the message.”

Ting is not alone in his thinking. Over the years CalPERS has been called on to divest from coal companies, the tobacco industry, firearms and various countries, among other things. Ting says his bill sends a message that California welcomes immigrants.

But CalPERS Chief Operating Investment Officer Wylie Tollettee says the fund is not in the business of making political statements. Instead the focus is on evaluating the risk and reward of investments. And Tollettee says CalPERS increasingly prefers to focus on engaging with companies rather than divesting.

“Own the company, be a long-term holder, be an active owner, care about what that company’s behavior is in the marketplace," he says. "You’re going to be much more effective if you’re an owner and have a vote of your shares with that company.”

Daniel Mitchell is a professor emeritus at UCLA’s Schools of Management and Public Affairs. He agrees divesting isn’t especially effective in bringing about corporate change.

“Essentially what happens is CalPERS sells the stock to somebody else who doesn’t have those particular interest or concerns and the stock price is largely unaffected," he says.

Mitchell says CalPERS needs to maintain a diverse investment portfolio in order to meet its pension obligations.