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CalPERS Drops Listed Prison Companies

CoreCivic and Geo Group will no longer be included in the pension fund’s portfolio.

The California Public Employees’ Retirement System (CalPERS) has divested from two publicly traded prison companies — CoreCivic and Geo Group — according to a source familiar with the matter.  

CalPERS came under scrutiny back in June when Educators for Migrant Justice, a nonprofit group seeking to end family separation, started pressuring the pension fund to divest.  

According to the source, CalPERS decided to drop the two companies roughly a month ago. The news was confirmed when the California Faculty Association posted on its Twitter account that CalPERS announced the news at a meeting on Friday. A spokesperson for CalPERS did not immediately return an email seeking comment.  

“I want to stress that [CalPERS] making this decision is a huge blow to private prison companies,” said Emily Goldman, founder of Educators for Migrant Justice, by phone. Her group had been attending CalPERS meetings and working behind the scenes to encourage change, according to Goldman. “The board has responded to an external divestment initiative by taking it internally, thereby implicitly recognizing that ESG risks are financially material to investors,” Goldman said.   

The group previously worked with California State Teachers’ Retirement System to divest from the two companies in late 2018, according to Goldman, as well as connected with the Oregon Public Employees Retirement System.  

According to a report Goldman compiled on the two companies, CoreCivic’s debt-to-equity ratio was 127.3 percent as of October 2019. The recommended debt-to-equity benchmark is 70 percent, Goldman said. Meanwhile, Geo Group’s is 262.9 percent, deteriorating from 184.9 percent the year prior, Goldman said. She also noted that MSCI gave both companies’ bonds its lowest rating — CCC.

“This shows that these issues are material to a company’s performance,” Goldman said. “Human rights abuses can affect a company’s bottom line.” One reason the companies have been struggling is the result of a move by California state to reduce its inmate population. Doing so created a material financial impact for CoreCivic, resulting in a loss of $31.1 million for the first six months of 2019, Goldman said.  

CalPERS’ chief of public affairs Wayne Davis noted that “it was not a divestment — it was an investment decision. Our CIO Ben Meng, who joined us in January, conducted a comprehensive review of our investments, including our benchmarks and indices. Based on that review, we removed 217 companies including CoreCivic & Geo Group.”

The state’s legislature also passed AB-32, a bill that would prohibit the state from entering into or renewing contracts with the two companies. State governor Gavin Newsom signed the bill into law on October 11.

A spokesperson for CoreCivic said, “We stand by our previous statement – including the facts that directly refute the false and misleading information shared by special interest groups.”

[II Deep Dive: CalPERS Comes Under Fire for Prison Investments]

A spokesperson for Geo Group pointed Institutional Investor to a statement it had previously provided on Friday evening.  

“These divestment efforts are misguided and based on a deliberate mischaracterization of our role as a long-standing service provider to the government, and ignore the fact that we have absolutely no role in setting criminal justice or immigration policies nor have we ever advocated for or against criminal justice or immigration enforcement policies,” the spokesperson said via email.  

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