I’m pleased to share that our research was featured in a recent article by Reason Foundation on public pension debt rankings for state and local governments. đđ
The article delves into the growing challenges of public pension liabilities and how they impact fiscal sustainability. Our paper contributes to this important conversation by providing insights into governance, intergenerational equity, and the long-term implications of these financial commitments.
As policymakers, financial professionals, and communities navigate these complex issues, I hope our work continues to serve as a resource for driving meaningful change and ensuring a sustainable future.
đ Check out the article here: đ Public Pension Debt Rankings for State and Local Governments
In 2011 I began to hunt around for a Ph.D. research topic. What was on my mind? Corporate governance failures from the Great Financial Crisis for one. Another, flagging demographics and retirement security. Thirdly, the firsthand experience of working with asset owners, their boards, finance and investment committees, and having seen the mixed performance, some excellent, some not so hot, but constantly shifting over time.
Fourteen years, thousands of research hours, one Ph.D. dissertation, several articles, engagement with hundreds of organizations, many conferences and webinars, subsequent studies (2021 Benchmarking Study of Governance in Higher Education with Commonfund Institute), an online assessment tool and one book later, our team in the finance department at Marquette University published these findings in a top academic journal this week. It is with great pride that we share this work. This research began a national conversation on the role governance plays on driving mission-driven and financial-related outcomes over time. Since that time we have seen governance crises play out not only in the private sector, at the municipal and state levels, but also in our federal government, making the subject of this work in this field all the more urgent and compelling.
We examine whether the discretionary governance practices of pension board of trustees have a significant impact on the returns of the planâs invested assets. We construct a unique database of board practices by analyzing meeting minutes of public plan board of trustees. Employing Principal Component Analysis, we formulate a pension plan Board Engagement Index to capture board dynamics beyond mere board size and composition. Our results demonstrate that pension funds characterized by a higher level of board engagement â reflected in higher index scores – exhibit enhanced fund performance. Our results are robust to endogeneity concerns. On an annual basis, one standard deviation increase in the engagement index corresponds to a 3.9% increase in benchmark-adjusted returns, everything else constant. Our findings underscore the substantial impact that board engagement can exert on a planâs financial performance.
Utilities are investing billions to upgrade infrastructure and build out green energy, passing budget-breaking costs to households; trying to keep the chocolate from melting
BORREGO SPRINGS, Calif.âCalifornia is doing all it can to expand renewable energy production and rebuild its electrical infrastructure after flaws led to a series of devastating wildfires.
The stateâs big utilities are spending billions to bury power lines and insulate wires, while at the same time moving quickly away from fossil fuels by building big solar and wind farms and transmission lines to carry the power.
As a result, resident Jessica Simpson Nehrer, who lives in Borrego Springs, near San Diego, has seen her electricity bill for her ranch-style house soar. It hit $1,873.90 in June, far exceeding her $1,200 rent and around double what it was two summers ago.
Justin âCoryâ Foster, a lineman who often traveled to storm-ravaged communities to help restore electricity, was used to working in searing summer weather as he perched atop utility poles to install wires. But as the heat index climbed to 113 degrees Fahrenheit on a job in Marshall, Texas, last year, the temperature baked his body.
Wildfires burning across the northern hemisphere in parts of Canada, Russia and the US since the start of the summer have led to a surge in carbon dioxide emissions and smoke trail as their intensity rises. Scientists at international agencies have been tracking emissions and monitoring a significant increase in daily total fire radiative power, which indicates the intensity of the fires. Western Canada is enduring an âextreme fire yearâ, said the Copernicus Atmosphere Monitoring Service (Cams), with estimated emissions at levels comparable with the previous highest years of the past two decades, only surpassed by the record set in 2023.
There is no shortage of bad green-energy news. Automakers are fretting about electric-vehicle growth, higher interest rates are smashing financial plans, permitting for big projects still takes forever and offshore wind is a mess.
But for every setback, there is a Sun Streams. This cluster of solar farms will cover more than 13 square miles of desert west of Phoenix. By 2025, it will provide enough electricity for roughly 300,000 homes, bringing Arizonaâs largest utility closer to its goal of a zero-carbon grid.
EU climate change body says it is âmore probable than notâ temperatures will reach new highs in next few month.
The world faces a new era of âglobal boilingâ, the head of the UN has warned, as scientific forecasts showed that July is expected to be the hottest month ever recorded. âThe era of global warming has ended; the era of global boiling has arrived,â AntĂłnio Guterres, UN secretary-general, said on Thursday. The global average temperature this month has at times been about 1.5C higher than it was before human-induced warming set in, according to the EUâs Copernicus Climate Change Service. The first three weeks of July were the warmest such stretch on record, with the month now âextremely likelyâ to be the hottest ever, it said.
2022 is wrapping up on many levels as the most challenging year financially since the Global Financial Crisis, geo-politically since 9/11, and politically since the McCarthy years, when the country was divided over fears of a fifth-column, communist invasion.
One casualty in this bubbling cauldron of uncertainty has been what has become known in the past few years as ESG investing. 2022 marked the first year of negative outflows in over a decade with investors pulling $13.2 billion out of ESG funds through November 2022, according to Lipper. Even when considering the broader universe of fund outflows this year, ESG outperformed and not in a good way.
The secular headwinds are obvious at this stage: in Europe the Ukraine War and the implosion of its energy market. In the U.S., rampant inflation. In the emerging markets, the insidious and growing activism of authoritarian regimes on the world stage, namely China, Russia, Iran and North Korea.
Certain factions in the United States have seized on this backdrop of uncertainty and placed a portion of the blame on the ESG movement, characterizing it as woke, damaging to the middle class and harmful to the economy.
Exhibit A: Blackrock has seen over $2 trillion in assets flow out, particularly from a wave of public pensions that have fallen under state legislation banning ESG investments.
Exhibit B: Vanguard announced recently its intention to back away from the NetZero Alliance to address âconfusionâ over its ESG positions as a leading indexer.
While a political backlash in the U.S. seems to be the norm these days on just about any issue, this has marked a sea-change in the ESG movement, just as the SEC pursues stronger mandates to enforce greenwashing claims.
This has no doubt made for a tougher business environment for ESG investing.
All that being said, beneath the subterfuge is real underlying progress developing, and it is happening in the places that matter most: companies. A confluence of rationalization happening at the ESG standards level, in the form of the International Sustainability Standards Board, combined with pending rules on SEC climate-related financial disclosure has lit a fire, and companies are not backing away.
Data science is leading the way, and companies that are measuring are finding that they can also manage. Capital markets will remain part of the equation, providing some additional carrots and sticks, but the real traction will only happen with companies that find ways to innovate ourselves into a new carbon pathway, as one example.
This is also I think bringing some new life to the whole rationale where I think ESG as an investing experience has found itself marooned. For too long investment managers have fallen back on this idea that ESG is a risk management exercise. This may be true, and certainly can be argued, but it only carries us so far. People wanting to do the right thing and have a passion for doing the right thing, is where the whole idea of good corporate citizenship started. ESG investing has failed with investors who thought this concept could be simply rationalized and outsourced. As we are finding out, doing sustainability is a roll up the sleeves activity that is best placed when as an integral part of doing business.
To decarbonize and electrify America’s economy, the head of the nation’s biggest public power utility thinks several hundred new nuclear reactors may be needed in the next generation, including 20 or so new smaller reactors across the Tennessee Valley.
In a talk to business investors and nuclear power leaders this week, TVA President Jeff Lyash said the utility’s initial efforts to build small modular reactors near Oak Ridge will serve as a model to construct more than a dozen other such reactors in TVA’s seven-state region. The reactors will help provide around-the-clock, carbon-free energy needed to meet TVA’s goal of operating a carbon-free power grid by 2050.
