Legislation pending in the U.S. state of Kansas to stop the use of environmental, social or governance (ESG) considerations by public contractors would reduce state pension system returns by $3.6 billion over 10 years, a new fiscal analysis shows.
The March 7 budget note says that KPERS has indicated it would have to restructure its portfolio "because the current investment managers would be disqualified as fiduciaries and replaced by alternative investment managers that would meet the bill’s requirements."
With expected returns cut by 0.85%, "the KPERS general investment consultant projects that the investment portfolio returns would reduce by $3.6 billion over the next ten years when compared to the current investment portfolio," the note states. Early divestment costs in private markets would cost $1.14 billion, the note also said. Other costs would include early divestment fees of new employees for the Kansas state Treasurer to monitor potential boycott activity.
At a public hearing on Wednesday about the bill and related legislation, KPERS Executive Director Alan Conroy said his agency would be forced to drop fund managers even if they were not running state assets with an ESG mandate, such as if their CEO had shared views about ESG investments.Kansas state senator Mike Thompson, sponsor of the bill that was analyzed, called the $3.
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