Mr. de Blasio said that a majority of the trustees on two of the funds — one for teachers and another for many employees not including police officers or firefighters — were ready to support divestment.
... The total amount managed by the funds is about $189 billion.
At least NYC comptroller Scott M. Stringer is sounding some cautionary notes, but since when has de Blasio put fiscal stewardship ahead of grandstanding?
"We find that the announcement of legislative/shareholder pressure of voluntary divestment from South Africa had little discernible effect either on the valuation of banks and corporations with South African operations or on the South African financial markets. There is weak evidence that institutional shareholdings increased when corporations divested. In sum, despite the public significance of the boycott and the multitude of divesting companies, financial markets seem to have perceived the boycott to be merely a 'sideshow.'"
"Using the South African divestment case, this study tests the hypothesis that social pressure affects stock returns. Both short-run (3-, 11-, and 77-day periods) and long-run (13-month periods) tests of stock returns surrounding U.S. corporate announcements of decisions to stay or leave South Africa were performed. Tests of the impact of institutional portfolio managers to divest stocks of U.S. firms staying in South Africa were also performed. Results indicate there was a negative wealth impact of social pressure: stock prices of firms announcing plans to stay in South Africa fared better relative to stock prices of firms announcing plans to leave."
In sum, divestment may make activists feel all warm and fuzzy, but the evidence is that (1) it has no significant effect on the target of the divestment campaign but (2) likely does harm the activists' portfolios.
"Unlike a boycott in a traditional goods market, the sale of a stock or bond in a financial market in sufficient volume to affect its price makes it more attractive to a buyer who doesn't care about the divester's social cause. These buyers will bid the price back up to its equilibrium level, the risk-adjusted net present value of expected free cash flows from the instrument. So whereas a goods boycott can be effective under certain conditions, a stock divestiture never can unless there is insufficient liquidity on the other side, a highly dubious condition in our financial market. The Presbyterian Church may have $7 billion in financial assets, but that's hardly a sufficient sum to control financial market pricing."
The city’s unfunded pension liabilities (i.e., pension debt) ballooned to an officially reported total of nearly $65 billion as of fiscal 2016, up from $60 billion just three years earlier. More than half of current pension contributions are required simply to pay down the pension debt instead of for new benefits for current workers.
Is that an environment in which one ought to be putting feel good grand gestures ahead of maximizing return?
The day may well come when NYC retirees have Bill de Blasio to thank for a default on their pensions.