I remember it like it was yesterday: Thanksgiving, 1982, and my maternal grandfather raising a glass to honor “Duke”, George Deukmejian, California’s newly elected Armenian governor.
In 1986, glasses were raised in South Africa as Deukmejian directed California to reallocate its investments from South Africa due to its oppressive Apartheid system. Deukmejian understood the pain of Black South Africans because of the pain he felt for his Armenian ancestors who perished during the Armenian Genocide.
By 1990 South Africa’s President P. W. Botha was out of office, and Nelson Mandela was out of prison.
There is something to be said of the power of money. It can make good people act bad, and bad people act good. California’s Public Employee Retirement System’s (CalPERS) CEO is Marcie Frost, a woman who falls into the former category. CalPERS manages nearly $500 Billion in assets for its two million retirees and is bound by ESG (Environmental, Social and Governance) investing principles, meaning that regardless of the rate of return, investments that run afoul of any of these ethical principles should, at least, be reconsidered.
In response to an advocacy group questioning CalPERS’ significant investment in Azerbaijan and adherence to ESG, Frost avoided ESG completely and instead regurgitated its “Investment Beliefs” that “CalPERS will take risks only where we have a strong belief we will be rewarded”. She continues, “success…for the…program is delivery of the long-term target return”. It’s true Investment Belief, then, is “profit over principle”. Profit is a legitimate goal of many investors, including CALPERS, but ESG qualifies that goal.
Azerbaijan is, for all intents and purposes, North Korea with oil. To be sure, both North Korea and Azerbaijan occupy the lowest category for press freedom; they both occupy the lowest category for people’s access to political rights and civil liberties. If that doesn’t raise an eyebrow, Azerbaijan ranks lower than North Korea for free and fair elections.
While no prudent investor would invest a penny into North Korea, one of the most oppressive hereditary dictatorships that exists today, California invests hundreds of millions of dollars into the other, most oppressive hereditary dictatorships that exists today – Azerbaijan.
Perhaps Azerbaijan’s ten-month blockade of the Armenian enclave of Artsakh in 2023 and the subsequent artillery attack on civilians forcing them from their ancestral land and then bulldozing their ancient Christian churches, not to mention fanning the flames of Armenophoboia by referring to Armenians as “dogs”, “jackals” and vermin worthy of extermination, does not necessarily fall into the ESG prevue. Fair enough, but the brutal oppression of Azerbaijani political rights and civil liberties, along with the unchecked environmental havoc its oil industry wreaks falls squarely within ESG and is ignored by Frost.
CalPERS retirees should know the dangerously high risk their money is now facing. Azerbaijan has been on the State Department’s “Special Watch List” since last year due to its severe violations of religious freedom. Earlier this year bi-partisan legislation was introduced in the House of Representatives to sanction Azerbaijan, including forty-four government officials, for torture, extrajudicial executions, other human rights violations, and repression of domestic political opposition. Sanctions are hardly the recipe for the success Frost desires. This is a risk too high.
CalPERS’ two million retirees deserve to have their futures handled prudently. Whether from the perspective of ESG, safety of return on investment, or that Azerbaijan is tasked with finishing the genocide of the Armenians that Turkey began in 1915, Azerbaijan should be avoided. CalPERS’ two million retirees deserve better than Azerbaijan. For that, all Californians can raise a glass. I am sure Duke would as well.
