By David Blackmon

In a recent piece, I wrote about the fact that the Divestment movement is now running into headwinds, as federal public policy under the Trump Administration moves further away from the movement’s goal of artificially limiting the production of oil and gas domestically, and as it is becoming increasingly clear that some major public pension funds are finding themselves severely underfunded after years of heavy focus on the movement’s investing priorities.

As it has become increasingly obvious over time that divestment has failed, we’ve seen a new push towards influencing companies directly via shareholder engagement actions. One of the main ways this has manifested itself over the last few years is through the engagement in shareholder proxies by major public pension funds, like CalPERS (California Public Employee Retirement System) and the New York State Common Retirement Fund. Helping that cause, 2017 marked the first year that three giant passive investment funds, BlackRock, State Street and Vanguard, joined with CalPERS in several proxy votes. Taken together, these three large funds hold ownership in most, if not all the companies listed in the S&P 500, and their votes can heavily influence the outcomes of proxy proposals.

In my prior piece, I mentioned that the managers at CalPERS recently admitted that their investment portfolio currently contains just 65% of the funds necessary to meet its future obligations to retirees. A new report published earlier today by the American Council for Capital Formation (ACCF) analyzes in great detail how CalPERS has reached its current point of under-funding. The report lays out how much of the blame for CalPERS current $138 billion funding deficit – it sported a $3 billion surplus as recently as 2007 – can be laid at the feet of “How CalPERS has prioritized relatively poor performing Environmental, Social and Governance (ESG) investments at the expense of other investments more likely to optimize returns (four of CalPERS’s nine worst performing funds as of March 31, 2017 were ESG-focused).”

Read full Op-Ed in Forbes