A number of police and firefighter pension funds have embraced ESG investing, even as their largest unions endorsed President Donald Trump and the strategy has become a lightning rod in GOP-led states.
Various police unions, including the National Fraternal Order of Police, the Police Officers Association of Michigan and the Police Benevolent Association, the largest police union in New York City, endorsed Trump in recent presidential elections, including in 2024.
The Trump administration was hostile to ESG investments, with some industry experts saying the administration's stance had a chilling effect on adoption of the strategies. But that view wasn't shared by every police and firefighter pension fund, and some even having detailed ESG policies in place.
J. Scott Simon, chief investment officer of Fire & Police Pension Association of Colorado, Denver, said the pension fund recognizes that ESG factors present “both financial risks and opportunities.” FPPA has had a formal ESG policy in place since June 2023, he noted.
“FPPA seeks to identify, evaluate, and manage financially relevant ESG factors in its investment process,” he said. FPPA represents 30,000 Colorado police, firefighters and other first responders and has about $8 billion in assets, including $6.78 billion in its DB plan.
FPPA is also a signatory to the Principles for Responsible Investment — the United Nations-supported network of investors working to promote sustainable investment through the use of ESG principles, he said. At the same time, Simon noted, the FFPA uses only external money managers and does not have any policy at present encouraging the hiring of money managers owned by women, minorities, the disabled or veterans.
For and against
On the opposite end of the ESG spectrum, the $344 million Anchorage (Alaska) Police and Fire Retirement System does not have an ESG mandate nor does its retirement board intend to use an ESG investment product.
“The retirement board exercises its fiduciary responsibility by investing to achieve the highest possible return with reasonable risk,” said Edward Jarvis, director of the pension fund. “To accomplish this goal, the retirement board hires outside investment managers who have full discretion and are accountable to the board for their results.”
Jarvis added that APFRS’ outside investment managers purchase individual securities and not ESG products. “They may purchase an individual stock that may be considered as ESG but it would be purchased only for the purposes of maximizing returns,” he said. ”The board does not have a policy regarding ESG. The board does not have any ESG mandates nor is it considering one.”
L.A. Fire & Police embraces ESG
However, one of the largest police pension funds in the country, the $31.4 billion Los Angeles Fire & Police Pensions is fully committed to ESG.
The pension fund has adopted an ESG policy to incorporate ESG considerations into the analysis of its investment decisions “to the extent that such considerations are financially material to generating the highest risk-adjusted returns in light of the board’s investment objectives, risk tolerance, and fiduciary duties,” said Bryan Fujita, the fund’s chief investment officer.
The board, he added, makes “prudent investment decisions informed by expert recommendations from consultants and staff.”
The plan’s assets are 100% externally managed, Fujita noted. In addition to the ESG policy, Fujita said that the LAFPP board has also adopted a “Proxy Voting Policy” and an “Addressing Social, Political, and Human Rights Issues Policy,” which are primarily applicable to the management of the public equity investment portfolio.
“These policies aim to manage investment risk and maximize investment returns through proxy voting and engagement activities,” he added. “The Proxy Voting Policy supports sound corporate governance practices and seeks to align the interests of shareholders and corporate management to build long-term sustainable growth of shareholder value through proxy voting.”
The L.A. pension fund policy establishes the plan’s voting positions on a “wide range of E, S, and G issues” that commonly appear on proxy ballots, Fujita said.
Meanwhile, the "Addressing Social, Political, and Human Rights Issues Policy" highlights financial and administrative risks that the plan may face if a company in which the plan has invested has made decisions that cause substantial social injury and that affect the financial health of the company, Fujita added.
“The policy defines the criteria for considering such situations and prescribes actions to be taken to resolve the issues,” Fujita said.
In addition, LAFPP has also adopted an “Emerging Managers Policy” that provides emerging managers opportunities to participate in investment manager searches and compete for contracts.
“While the policy generally defines emerging managers based on the amount of firm assets under management, fund size, and/or fund number, the policy stipulates that outreach shall be conducted to identify firms that have ownership by minorities, women, persons with disabilities, U.S. military veterans, and/or LGBTQ individuals to encourage these firms to participate in LAFPP investment manager searches,” Fujita added.
ESG still contentious
Still, ESG remains a contentious issue and sometimes police or firefighter funds have declined to invest.
For example, in January, New York City Police Pension Fund joined three other New York City pension funds — New York City Employees' Retirement System, Teachers' Retirement System, and the Board of Education Retirement System — in filing shareholder proposals with six major banks asking them to move closer to their own stated goals of achieving net zero emissions.
However, a spokesperson for the New York Comptroller's Office confirmed at the time that the New York City Fire Pension Fund was not involved in these proposals. New York City's five retirement systems have combined assets of about $254.4 billion.
Additionally, there are police pension funds weighing whether to divest from firms they consider anti-law enforcement.
Kent Custer, chief investment officer of the $10 billion Illinois Police Officers' Pension Investment Fund, Peoria, said its board “has begun to discuss investment and policy considerations relating to investment in or contracting with businesses that have supported activities that are contrary to the interests of IPOPIF, such as anti-police or anti-pension initiatives or organizations."
But Tim Hill, a former firefighter in Phoenix, rejects the notion that policemen and firefighters are generally conservative. He is now president of the Alliance for Prosperity and a Secure Retirement and former director of the Pension Resources Department of the International Association of Fire Fighters.
“Firefighters and police are Republicans, Democrats, and Independents,” he said. “Some are conservative, some are liberal, some are somewhere in between. Regardless of our political leanings, we all want and deserve a retirement savings that sees us through our life after work.”
Hill added that ”regardless of our individual politics, we want the freedom to select the best investment strategies to fund our well-earned retirement.”
The International Association of Fire Fighters is a labor union which represents over 344,000 fire fighters and emergency medical workers across the U.S. and Canada. The Alliance for Prosperity and a Secure Retirement is a group of investors and experts supporting public policies that improve and strengthen retirement opportunities
Still, Leonard Gilroy, vice president at Reason Foundation, a libertarian think tank, said that police and firefighter pension administrators “should avoid politicized investments like ESG, not because some members may not like them but because their duty is to ensure they can provide the constitutionally guaranteed retirement benefits promised to workers.”
Gilroy added that if pension systems make investment decisions based on politics, “regardless of it being the left or right, they've lost sight of their fiduciary duty.”
