The US House of Representatives Committee on Education and Workforce issued a letter to the California Public Employees Retirement System (CalPERS) requesting information related to ESG investments. The Committee alleges that CalPERS pursued ESG investments at the detriment of its beneficiaries, violating its fiduciary duty. The letter states:
“Under the Code, CalPERS as a public pension is eligible for significant tax subsidies if, among other things, its benefits are provided ‘for the exclusive benefit of [an employer’s] employees or their beneficiaries. The Committee seeks information to determine whether CalPERS is undermining this requirement by prioritizing a radical Environmental, Social, and Governance (ESG) agenda over its obligation to its beneficiaries, which will inform its potential reforms to ERISA and the Code.”
At the center of the investigation are losses from CalPERS investments in the private equity-backed Clean Energy and Technology Fund (CETF). The letter alleges that these investments shrank by 71% from $468 million in 2007 to $138 million in 2026. A review of CalPERS records indicates that their CETF investment did shrink, but not by the margins outlined in the House letter. Instead, those records indicate a -18.6% net internal rate of return. It’s also worth noting that the House committee has no enforcement powers and cannot bring litigation against CalPERS. However, the potential findings from a House investigation may be provided to the Department of Justice. CalPERS has until February 27 to furnish the requested information to the House committee. We’ll see what becomes of the investigation after this stage.
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