Interview date: November 17, 2014
"Trustees have the power to shape the market, but they have little influence in the pension value chain. We need to train people to become the checks and balances in the pension community. Unions at the turn of the last century built housing, built health clinics--built the middle class. We can do it again." - Randi Weingarten
Tom Croft recently interviewed Randi Weingarten for the upcoming Responsible Investor Guidebook. Following is the Q&A from the interview:
TC: You’ve made some tremendous news recently for your corporate governance activities and your efforts in the Clinton Global Initiative to foster national infrastructure investment through the prudent investment of pension funds, including Teachers’ funds. Please tell us about your funds, and how you began moving these agendas.
RW: What drives all of this is how do we have an economy that works for all, not just 1%. We’re looking at what instruments to have influence in or access to the way that our economy is run. We want to share in that responsibility. Dan Pedrotty is helping us to take this to pension investment and corporate governance 2.0. He is fantastic in terms of being a real teacher. We need to be able to explain things to the American people—if you want to move an agenda –need to explain it.
This is true for governance issues and especially for investment in infrastructure and the issues around what drives our economy. This is a win win win. We need patient capital for our infrastructure and muscle to engage with the engines driving the economy. That’s what Wall Street should be doing, not guarding their deal and fee structures.
On the report AFT did on the Wall Street managers and vendors taking our money and then working against us, —the firms tried to grossly mischaracterize what the report said. We simply said to those who had decision making authority in investments: If you are trying to solicit business from teachers pension funds, we should know if in your other activities you are trying to diminish or eliminate defined benefits.
People like Dan Loeb then mischaracterized all this. Instead of answering the question, he attacked us. Many who were on the manager list of firms backing the anti-Teacher efforts have gotten off the list, and reformed their behavior. They are now supportive or dropped off boards in question.
People have a right to know about who’s making a buck off of them.
TC: How did you personally become interested in the pension fund world and progressive corporate governance and responsible investment?
RW: All my adult life I have been interested in capital strategies. The teaching profession is predominantly female, and women are not interested in money and capital. In my early stages as a lawyer, I began to think about how to use workers capital for benefit of workers and economy. I became interested in pensions and what pensions can do, a very important part of economic security. Every pension dollar supports 2 dollars nationally.
I was Counsel to the Teachers union in NYC—worked with the Teacher on how to frame fiduciary duty as one that aligned with the needs of working people and beneficiaries.
Our country is facing a retirement crisis. The medium account balance for retirement is $3,000 for all working class households, and $12,000 for all retirement age households. It will be a crisis that will outstrip wages and the health economy.
TC: What are your thoughts on the progress that Organized Labor has made in the infrastructure investment field? We know that there is some interest among some funds in the West Coast Infrastructure Exchange and the Chicago Infra Trust. Do you share that interest?
RW: We’re making steady progress. Have we cracked the code yet? No. Pension funds actually see infrastructure as a viable investment even apart from the social good that engenders. We need to create more of the deals that match the funding opportunities with the investors. Deal flow is very important.
Infrastructure banks and vehicles like those created by the Australians and Canadians are very important models for us here. CalSTRS and CalPERS not relying on Wall Street (the 2 and 20 model has been long broken).
TC: What would you like to see come about in terms of the commitment to reinvest teachers’ pension dollars in infrastructure, including in New York City post-Sandy? How do you envision that happening?
RW: Our CGI (Clinton Global Initiative) investment goal is $10 billion. That is moving apace. We are reviewing more innovative opportunities to deploy capital—looking at the great models created by Pegasus and HIT. We need an alternative model to the 2 and 20 model—and Wall Street banks that are essentially fleecing the public and destroying the public good. If you think about pension capital and patient investments—this can become an economic engine for a long time. That is the opposite of the 2 and 20 model.
In McDowell County, we are trying to create shared prosperity in the 8th poorest county in America. There was so many jobs lost during coal mechanization. These people, including our members, are facing long term challenges, including a huge population loss. Half the kids are having major trouble in school, their parents unemployed. There’s a drug addiction problem.
We’re trying to head a private public partnership with former Governor Manchin’s wife. The first phase was the revitalization of schools. We need to build a livable village for people, provide social services, social safety net, housing and transportation.
At the longer term level—3-5 years—we are embarking on a Teacher shortage-due to lack of teacher housing and downtown decline. We are fundraising with HIT, the Department of Ag, for a $6 million dollar project, assisted by tax credits. We have 4 of 6, need other 2 to make it sustainable.
TC: How do you expand retirement security?
RW: We’ve been supporting the Center for Retirement Initiatives at Georgetown, and working with state treasurers.
TC: Heartland has long been advocating the idea that pension funds and trustees, consultants and managers, the capital stewards of peoples’ retirement trusts, should work together in ways that defend and expand retirement security policy and that results in a greater level of prudent, profitable and responsible economic impact investments in the real economy. What is your view on that? How do we do that?
RW: Trustees have the power to shape the market but they have little influence in the pension value chain. We need to train people to become the checks and balances in the pension community. Unions at the turn of the last century built housing, built health clinics—built the middle class. We can do it again.