The American Accountability Foundation (AAF) has accused the state of Arizona of utilizing pension funds to advocate for racial and environmental issues in public companies. The accusations focus on Environmental, Social, and Governance (ESG) elements in investor resolutions, raising concerns about race, gender, and politics.
The pension funds are managed by the Arizona State Retirement System (ASRS) and distributed via firms like Institutional Shareholder Services Inc. (ISS) and Glass Lewis. Both firms are popular for their support of ESG initiatives. The AAF, however, disapproves of these actions, insisting that pension funds be used more wisely.
The ASRS argues that companies managing ESG risks are more long-term resilient, thus boosting returns. ISS and Glass Lewis provide research and suggestions, but ASRS makes the final voting decisions based on the plan members’ interest.
The role of pension funds in societal issues reignites the ongoing debate.
Arizona’s disputed use of pension funds
Some state senators worry that the ESG policies could lead to economic instability affecting people, regardless of political allegiances.
According to the oversight group, there were 183 cases where pension funds were used to support “awakened” investor proposals. This included resolutions demanding racial equality audits, gender pay gap reports, and pro-choice measures.
For instance, ASRS backed a resolution for an independent racial equality review of Walmart’s impact on BIPOC communities. Notably, approval came from retail employees, including Walmart and Amazon, reflecting a broader push for corporate accountability.
The ASRS, which manages $12 billion in US equities and serves over half a million state public servants, stands by its actions. According to David Cannella, the Public Affairs and Media Relations Manager for ASRS, decisions are made considering various factors, including economic conditions, market trends, and risk assessment, not political motivations.
ISS and Glass Lewis advocate for ESG policies, considering them good investments. In their view, embracing these policies ensures business continuity and profitability. This outlook is echoed in a 2021 policy paper by Glass Lewis, which highlighted ESG issues’ importance in determining votes on shareholder proposals.
