Kansas anti-ESG bill could reduce pension returns by $3.6bn
March 15, 2023
Kansas’ proposed legislation to prevent ESG considerations by public contractors could lower state pension system returns by $3.6bn over the next decade.
The Protection of Pensions and Businesses Against Ideological Interference Act would also cost the Kansas Public Employees Retirement System (KPERS) $1.14bn in forced divestitures.
The figures come from new fiscal analysis by KPERS, which highlights the potential negative impacts to an already underfunded pension system.
The bill would require KPERS to divest from and prohibit state contracts with financial companies that engage in ideological boycotts.
The KPERS is a defined-benefit plan for 289,000 state and local public employees, which manages $25bn of assets.
To meet the bill’s requirements, KPERS would be forced to restructure its portfolio and hire new managers, according to Alan Conroy, executive director of KPERS.
He said: “Current investment managers would be disqualified as fiduciaries and replaced by alternative investment managers that would meet the bill’s requirements.”
Conroy also criticised the bill for its broad definition of fiduciaries, which would lead to the termination of management contracts.
Currently, the bill “does not allow for any advertisements, statements, explanations, reports, or participation in coalitions, initiatives, or joint statements on ESG.”
Conroy added the KPERS’s funded ratio could be lowered by 10% due to the combined impact of lost assets due to divestment and increased liabilities due to lower future investment.
As a result, he has urged the Kansas House and Senate committees to reject the bill as written.
However, Kansas state senator Mike Thompson stated the $3.6bn figure was “overstated” because the KPERS would be able to locate other managers.
As a Republican state, Kansas’ new anti-ESG bill contributes to the rise of anti-ESG sentiments evident across Republican states.
In March, house lawmakers approved a resolution to overturn the Department of Labor’s new ESG rule for retirement plans, after 25 Republican states filed a suit to invalidate the rule.
In January, Kentucky threatened to divest from 11 major financial companies for participating in the boycott of energy companies.
Last Updated: 14 March 2023