BusinessWeek has an article about California's public pension funds, and how following a socially conscious agenda allegedly has cost them money:
Eight years ago, then-state treasurer Philip Angelides launched his "Double Bottom Line" initiative, espousing a philosophy of profits and social reform. ... The strategy has been a drag on the returns of the funds, which overall have still trumped the S&P 500-stock index over the past five years. CalPERS, the largest pension fund in the U.S., left $400 million on the table by screening out investments in China, Colombia, and other countries. CalSTRS revealed that its cigarette ban cost it $1 billion in lost gains. With California home prices down nearly 40% in the past year and commercial properties off 15% , the funds' real estate bet could fizzle.
The first thing to notice is that the funds still outperformed the S&P 500. So relative to a completely passive investment strategy, the funds did perfectly fine.
What the article really says is that the funds changed strategies in 2000, and underperformed the returns they would've had if they hadn't changed strategies. Alright, fair enough. The slave trade was an extremely lucrative business back in the day, and if pension funds existed at the time, they likely would have invested in the slave trade.
It may be more moral for a poor person to make money immorally than a rich person, but to a point. Stealing a loaf of bread to feed your family is one thing, investing in companies which treat their employees like slaves is another. Now, I'm not saying that investing in tobacco companies or companies with questionable (at best) labor practices is the same as buying and selling slaves, but the principle is the same. You're making money off of other people's suffering. That's wrong, no matter who you are, or how much you need/want the money.
The article closes with a quote: Says Joel Kotkin, a fellow at Chapman University: "What you're seeing is good intentions going bad."
No, what you're seeing is the cost of good intentions. Nothing comes free, including being a good person.
Error Rating: 6. Really, BusinessWeek should be able to recognize that helping others often means hurting yourself.