Today, every realm of society is being more and more politicised. From gas stoves to plastic straws, it seems no corner of life is safe from the churn of political punditry. But some things should stay boring, and retirement is one of them.
In the United States today, public pension systems control almost $9.5 trillion — more than the GDPs of the United Kingdom, France, and Canada combined. These funds aren’t just massive pools of money; they underpin the American economy, throughout every sector and industry, and finance everything from single-family mortgages and student loans all the way to critical billion-dollar infrastructure projects like high-speed rail networks or bridges. Above all, they work to provide retirement security and futures for millions of teachers, first responders, and countless other state and local employees.
For the entirety of American history, these pension assets have been controlled by independent trustees, industry experts and labour representatives far-removed from the mud-slinging and finger-pointing of politics. Their decisions are governed by detailed — and often mind-numbingly boring — investment policy statements and constrained under strict fiduciary duties requiring them to act solely in the best interests of beneficiaries.
Over the last decade, that tradition has quietly unravelled. Just days into the new year, the House of Representatives passed HR 2988, legislation intended to restrict the consideration of so-called ‘ESG’ factors — environmental, social, and governance considerations — in pension investments. Its framers argue it protects against ‘woke’ pension trustees ‘weaponising’ pension assets to further their political agendas. In reality, pension trustees are already required to focus solely on financial returns by their fiduciary duty. But this legislation lays the groundwork for an already hyper-active Department of Justice to launch spurious lawsuits against pension trustees or intimidate them into violating their fiduciary duty.
Our own state of Texas serves as a clear example of pension politicisation run amok: sweeping legislation targeting pension independence shaped more by ideological narratives than responsible pension governance. HB 793, enacted in 2019, barred state-administered pension plans alongside the Permanent School Fund, from investing in companies that ‘boycotted’ Israel. The next session, the legislature passed SB 13 and SB 19 extending prohibitions to companies deemed by the Comptroller to ‘boycott’ energy companies or firearms manufacturers. These funds, alongside the PSF, hold a combined $355 billion and represent more than three-quarters of a million retirees, namely teachers, firefighters, and almost every other state and local employee.
My point is not to argue in favour or against the firearms industry or to re-litigate the Israeli-Palestinian conflict; there’s a time and place for that. The problem is pension funds are a poor and costly venue for resolving them.
In Texas alone, our pension funds already face more than $76 billion in unfunded liabilities. One study estimated that in the year after its passage, SB 13 alone cost our state pensions more than $821 million in losses, and that number is estimated to rise to $22 billion by 2050. These don’t merely represent theoretical figures; they directly contribute to greater fiscal pressures on the state, higher contribution requirements from employees, and pressure on future benefits and cost-of-living adjustments for our most vulnerable retirees.
This issue is also by no means restricted to a single party either. Comptroller Brad Lander ordered New York City’s almost $300 billion pension fund divest from more than $45 billion of BlackRock-managed funds, citing the manager’s ‘de-prioritisation of climate concerns.’ Likewise, the legislatures of Maine and the District of Colombia, among others, have voted largely along party lines to mandate pension funds divest from fossil-fuel companies.
By unilaterally restricting pension investment opportunities for purely political purposes we risk letting the financial futures of our most vulnerable retirees become fodder for the twenty-four-hour news cycle and the ever more inane world of political punditry. For centuries, pensions have existed on the margin, a boring afterthought insulated from the chaos of politics and governed by rules and reason rather than rhetoric. That insulation is worth restoring.