In recent months, Colorado PERA has received inquiries about its approach to divestment from certain categories of its investments. The idea of divestment – making investment decisions based on national, or even international, public issues, with the goal of avoiding investments that are in conflict with specific public policy objectives – has become a political football of sorts for public pension funds throughout the United States. Various interest groups have called for divestment on political or environmental, social, and governance (ESG) grounds, while others have argued that pensions’ sole investment responsibility is a fiduciary one, and that past divestment efforts in states such as California have resulted in significant costs to public servants’ retirement funds. Throughout 2018, the PERA Board of Trustees worked to update the divestment policy that it first adopted in 2007, seeking input from fiduciary counsel and investment consultants, as well as hearing from PERA members.
In January 2019, the PERA Board finalized and adopted an updated Statement on Divestment. The Statement notes that PERA will implement divestment mandates from the Colorado General Assembly, but also that the Legislature should consider any such proposals with caution and fiduciary care. As the statement explains, PERA serves the singular purpose of ensuring the retirement security of Colorado’s current and former public servants.
The statement concludes:
The issues facing our world today are not easily separated into gradations of severity or importance. Consensus as to the priority of these types of issues and the proper recourse is difficult to achieve. As a result, once a divestment mandate is imposed to address one issue, the resulting “slippery slope” makes differentiation among the remaining issues contentious and divisive. Increased divestment is costly and limits PERA’s ability to effectively seek the best risk-adjusted returns to secure the retirement benefits of public servants. For these reasons, PERA will oppose divestment efforts unless such opposition is inconsistent with its fiduciary duty, but will implement divestment mandates passed by the Colorado General Assembly.
For more information on the PERA Board of Trustees, see the following PERA on the Issues posts: