Union Pension Asset Portfolios Go Green and Global

Union members, especially those with a pension plan, can count on hearing the following words from their leaders with increasing regularity: “sustainability,” “ecological footprint,” “biosphere” and “renewable.” That’s no mystery. Labor officials lately have been highly receptive to the idea of investing union-sponsored retirement assets with managers publicly committed to protecting the environment. Make no mistake about it – promoting environmental quality should be a priority everywhere, in industrialized and developing nations alike. But such activism covers a lot of ground when it comes to assessing and resolving problems. Very often, advocates for ecosystem protection line up behind policies whose consequences are likely to erode corporate self-governance, individual property rights and U.S. sovereignty. In other words, they’re the sorts of people who would not part company with union leaders on most issues of the day.     


If one group embodies the ecology-minded side of the Socially Responsible Investing (SRI) movement, it’s CERES (pronounced “series”). Founded in 1989 and now headed by former professional money manager and Clinton-era EPA Regional Administrator Mindy Lubber, this Boston-based network of mutual funds, corporations, public officials and nonprofit groups has been on a mission to persuade institutional investors to shift their portfolios. CERES, named after the Roman goddess of agriculture, wants pension managers to address issues such as climate change, deforestation, waste disposal and resource depletion. And it’s making a difference. It was CERES, for example, who developed the Global Reporting Initiative (GRI), establishing de facto baseline standards for company reporting on environmental, social and economic performance. This nongovernmental organization also has: organized a 2005 United Nations conference on climate change that united around 500 investment, corporate and government leaders, a few dozen of whom committed themselves to a 10-point disclosure and action plan; pressured major companies such as Nike, AIG and Dell Computer to alter certain business practices; and launched the Investor Network on Climate Risk. 


CERES’ networking pitch is that going green is good for business. The nonprofit group is calling upon members to do their part to combat global warming:   


As fiduciaries and long-term investors, we see significant short- and long-term risks from climate change to the value and security of our investments and capital markets more broadly. And we recognize that the impacts of climate change will continue to be multi-dimensional – affecting corporations’ abilities to secure the full range of necessary resources poses to businesses, investors and the economy.  But greater efforts are needed.


The group has managed to secure substantial support from state comptrollers/treasurers, financial intermediaries and nonprofit foundations. As of February, assets under CERES management totaled $1.75 trillion, a sum not even including the $6.5 trillion controlled by “supporters in principle.” Even a modest shift in portfolios could have an enormous impact on the way business is done throughout the world. 


Now some key figures in American labor are getting in on the campaign.  Signatories to the climate risk agreement include Andrew Stern and Bruce Raynor, the respective presidents of the Service Employees International Union and UNITE HERE.  With a combined membership of nearly 2.5 million, the two unions and their trustees have the capacity over the long run to move tens and possibly hundreds of billions of dollars in pension assets into activities ostensibly promoting a sustainable economy. 


Perhaps even more significantly, AFL-CIO President John J. Sweeney this February delivered a speech in New York before the UN Summit on Climate Risk, summarizing his view that U.S. environmental policy is a worldly matter. Speaking at the invitation of CERES as well as the UN, Sweeney called for new rules and strategies for business to cope with environmental problems. Citing the U.S.’s “interdependence on developing nations,” he called for a redirection of assets, beginning with those managed by fiduciaries of member unions:


Executing this strategy requires deploying our current human and financial capital to secure a future we want to live in. Much of that capital is workers’ retirement funds. Trillions of dollars around the world are invested to provide retirement security and education to billions of people. In the U.S., $5 trillion is invested on behalf of union members. 


Public policy, he added, should flow from this. And that means our nation should cede much of its authority to supranational bodies. Sweeney was explicit:


The global economy and the dire threat of a globally unstable climate require global rules. We need common rules for all – worker protections, investor protections and environmental protections. Sixty years ago, the United Nations declared that workers around the world must be guaranteed core labor rights. The right to an independent voice in our workplaces, made real through the right of workers to organize and bargain for a better life. And the right of all people to be free of the curses of child labor, forced labor and discrimination. More than ever, these standards must be enforced throughout the global economy. They must apply to the millions of new jobs that will be created as the global economy changes. 


These words underscore the fact that unions over time have become partners, if at times fractious ones, with corporations, governments and NGOs in promoting a post-national sensibility. This elite aggregation, at least in this country, isn’t so much anti-American as post-American, national identity being of only modest importance and usually a hindrance in the pursuit of a larger goal such as profit, ecological sustainability or human rights. Unions, in other words, are prepared to play dice with huge pension reserves upon which tens of millions of active and retired American workers depend. Increasingly, they will choose fiduciaries on the basis of their adherence to stated missions of post-American umbrella groups like CERES.


Two additional considerations should leap out here. First, few, if anyone, at various UN conferences on global warming has questioned the guiding assumption behind the conferences. Perhaps they should have. While claims that man-made greenhouse gases explain rises in atmospheric temperatures aren’t a “hoax” (as some pundits have argued), they are far from proven. Moreover, the data don’t necessarily lend themselves to the conclusion that advanced nations (like ours) have an obligation to scale back per-capita consumption. Mean temperatures across various latitude belts have increased by roughly 0.6 degrees Celsius over the last century – even prominent global-warming skeptics such as Richard Lindzen, Robert Balling and Patrick Michaels admit to that. But they caution against taking methodological shortcuts or drawing hasty conclusions, as all too many laymen appear to have done. Following a 2001 study issued by the National Academy of Sciences, for example, Lindzen, a Harvard-trained atmospheric physicist at MIT, wrote: 


(T)here is no consensus, unanimous or otherwise, about long-term climate trends and what causes them…I cannot stress this enough – we are not in a position to confidently attribute past climate change to carbon dioxide or to forecast what the climate will be in the future. That is to say, contrary to media impressions, agreement with the three basic statements tells almost nothing relevant to policy discussions.”     


Unfortunately, CERES and its investor allies treat the issue as though it were settled.   

The second inconvenient truth is that most private-sector union pension plans in this country come under U.S. Labor Department regulations established pursuant to the Employee Retirement Income Security Act (ERISA). And that 1974 law clearly states that management of employee pension funds must: 1) strike a prudent balance between minimizing risk and maximizing returns; and 2) consider the welfare of current and future beneficiaries to the exclusion of everyone else. In the end, it is not for CERES or any other SRI organization to determine what a “responsible” ERISA-covered union investment should look like. The AFL-CIO, the Service Employees and other labor officials should observe the old proverb: Look before you leap. (CERES, February 2008; accountability-central.com, 2/18/08; other sources).