Illinois Treasurer Pressures Facebook With State Investments

By Cole Lauterbach | Illinois News Network

SPRINGFIELD, IL — Illinois’ treasurer is using college savings funds to leverage companies to change for social good. His office calls it common sense, but it’s being criticized as political activism.

Illinois Treasurer Michael Frerichs joined with other investors last November to pressure Facebook to better address their “fake news” problems before the 2016 election. He’s also joined with other state treasurers to pressure drug wholesalers to change how they do business in an effort to curb opioid distribution.

Curious of what funds Frerichs was advocating in the name of, Mark Glennon of Wirepoints.com found via a public information request that Frerichs has been using the funds his office has invested in the BrightStart Illinois College 529 Savings plans to pressure companies on social issues.

If a 529 plan is set up as passive, Frerichs’ office would have the latitude to advocate for environmental, social or governance (ESG) issues, since it would be managed by the Union Bank and Trust Company, the treasurer's investment team. Plans directed to individual portfolios would not give the office that flexibility.

“Those shares belong to the college savers, not him,” Glennon said. “He’s substituting his judgment as an active investor and it’s clearly not for the purpose of maximizing returns, but for political purposes.”

In a statement, Frerichs’ office said advocating for change in the companies the state’s invested in is his responsibility.

“The treasurer is the state’s chief investment officer. Encouraging publicly traded companies to adopt practices that lead to higher stock prices is a fundamental responsibility of any investment officer,” spokesman Greg Rivara said. “This simple and successful strategy really is about common sense and has been used for decades in the public and private sector.”

The phenomena of investors pressuring companies to address ESG issues is not uncommon. Just last month, ExxonMobil seemed to bow to investor pressure when the company announced it would look into the potential costs of climate change on its profits. Another major investor, along with the stewards of California’s teacher retirement funds, is pressuring Apple to address screen addiction issues.

via Illinois News Network

Illinois Patch file photo