A bill requiring an examination of the risks of climate change to the retirement investments of Colorado’s public employees died in the recent session of the Colorado General Assembly – a proper fate for a redundant and unnecessary requirement, said Colorado Treasurer Dave Young in a visit to Durango.
Young, a Democrat from Greeley, said the board of directors of the Public Employees Retirement Association already was analyzing PERA investments for risk factors not normally considered by usual financial assessment, which strives to maximize an investment’s rate of return.
PERA’s board, of which Young is one of 16 members, already was in “a deep analysis” of factors broadly coming under the term ESG, or environmental, social and governance factors.
“We were already analyzing investments from a bigger lens than just rate of return on investment,” Young said in an interview Thursday in Durango, which he was visiting during a tour of the Western Slope.
Upon initially hearing about the bill, House Bill 19-1270, calling for an analysis of investment risks based on climate-related threats, Young said many board members thought they should make their opposition to the legislation public, but Young thought that would be counterproductive.
Instead, he said, the PERA board conducted an educational campaign among state lawmakers to explain the board’s existing efforts to screen public employee retirement investments for threats from environmental, social or governmental issues.
“My talking point was that we were already doing this” Young said. “We have a responsibility to evaluate all investments to ensure they are not at risk from a variety of factors. We don’t want to be investing in buggy whips.”
The bigger challenge, Young said, is dialing in the appropriate social, cultural and political factors to study in evaluating investment risks.
He noted already the board is called to invest more in clean energy and in Colorado firms as a way of spurring a cleaner environment and economic development in the state.
“The challenge for the board is what are we analyzing for when we make investments,” he said. “What are the indicators that tell us now is the time to sell that investment.”
Unclaimed Property Trust FundYoung also expressed caution about an increasing tendency by state lawmakers to allocate funds from the state’s Unclaimed Property Trust Fund.
The Unclaimed Property Trust Fund collects unclaimed property from heirs of estates and includes unclaimed financial assets such as stocks, bonds, savings accounts, life insurance payouts and mutual funds for five years. The state is required to make an effort to contact heirs to alert them that they have unclaimed property being held in the trust fund.
Late in the 2019 session, HB 19-1322 passed, allocating $30 million to fund grants for affordable housing in Colorado. The $30 million was funded by assets from the Unclaimed Property Trust Fund.
The state was already tapping assets from the Unclaimed Property Trust Fund, which has a growing pot of $116 million, to pay for dental costs for state residents who are on Medicaid.
“My concern is that my colleagues on the second floor (state lawmakers) think this is the people’s money, but it’s not. It’s individuals’ money. This is not the state’s money,” he said.
Young said continued raids on the Unclaimed Property Trust Fund to fund state programs means the state will be liable for paying individuals for their unclaimed property if claims ever exceed deposits in the trust fund. In other words, the state would have to take money out of the general fund to reimburse money taken from the trust fund if the fund ever runs in the red.
Additionally, the state should be concerned that more heirs will be learning of their unclaimed assets, Young said, because in the most recent legislative session, lawmakers also updated the communications the Treasurer’s Office can use to contact heirs with unclaimed assets in the trust fund.
Previously, the office could use only mail to contact heirs, but now it can use emails, texts and other communication tools created since the 1980s.
“We’re going to be more proactive in contacting people, and lawmakers should be aware there is likely to be less money in the fund, and that could be a problem in the future,” he said.