Twice in recent years, California has used its economic power to make it clear to the world that it will not aid governments whose policies have been rejected by civilized nations everywhere.
In 2006, we divested from Sudan because of its role in the ongoing genocide in Darfur. The next year, we banned investment in Iran because of that country's pursuit of nuclear weapons and its contributions to instability in the Middle East. I was proud to sign legislation making these moves, preventing California's pension funds from investing in companies with active businesses in two of the world's most offensive regimes.
So perhaps it appears inconsistent that I am opposed to a bill pending in our state Legislature that, in the name of human rights, would prevent the state's pension systems from investing in certain private equity funds.
Yes, California is concerned about human rights violations. However, this measure, AB 1967, is an ineffective way to demonstrate California's concern. It would not lead to the kind of change its proponents hope for -- and it would cause a deep wound to our retirement funds and government programs when we can least afford it.
The bill, scheduled to be considered in committee today, would prohibit the state's public employees' retirement system, or CalPERS, and teachers' retirement system, or CalSTRS -- the two largest public pension funds in the U.S. -- from investing in private equity investment partnerships that do business with selected "sovereign wealth funds." Sovereign wealth funds are investment funds owned by foreign governments.
AB 1967 would require CalPERS and CalSTRS to impose detailed and complex requirements on California investment officials to evaluate and monitor nations affiliated with an SWF and its compliance with half a dozen treaties related to human rights. The people administering our pension funds would essentially be required to become experts on human rights treaties.
I oppose this legislation for a number of reasons. Chiefly, this measure is unlike the legislation I signed with respect to Sudan and Iran. Those measures barred investment in entire countries. AB 1967 instead addresses investment into a relatively small class of investment vehicles. It does not send the same powerful signal to the world, would do little to address human rights and would impose a costly burden on California.
