Value Judgments at the Heart of Green Transformation: The Leverage of Pension Fund Investors

As the urgency for green transformation grows, the question of whether finance capital can be harnessed to promote green transformation has been raised. Public pension funds are of particular interest since they are publicly governed, have long-term interest, and are growing in proportion to the global investment capital. However, transformative change demands a reprioritization of fundamental values in terms of trade-offs among economic, environmental, and social ends. This article identifies shifts in value judgments in public pension fund investments and particularly focuses on the institutional constraints by which value (re)priorities are resisted by investigating Swedish public pension funds. While there are signs of environmental embedding of the economy, I also note neutralization of the role and investment strategies of the funds, which has a stabilizing rather than a transformative function. The neutralization constrains deep green transformation, which demands politicization of the role of institutional investors.

The Bulgarian Pension System Reform and Implicit Pension Debt

The impact of the Bulgarian pension sys­tem reform, implemented with the 2015 Social Insurance Code amendment act, on the im­plicit pension debt is the main focus of the present article. Holzmann’s methodology for calculation of open group pension liabilities is used (Holzmann et al., 2004). The long term forecasting of public pension fund revenues and expenditures is made possible through Professor John Wilkin’s actuarial model, which has been prepared within the scope of the World Bank’s assistance for Bulgaria in the implementation of the pension reform. The in­put in the model consists of demographic and macroeconomic suggestions as well as social security data for the 40-year period (2015- 2055) after pension reform enactment. The impact of the pension reform’s parameters on the implicit pension debt of the Bulgarian public pension system is elaborated through scenario analysis. Among the key findings of this article are the important role of the in­creasing of retirement age and serving period, as well as the contribution size for pension, for decreasing of implicit pension debt.

The Grand Experiment: The State and Municipal Pension Fund Diversification into Alternative Assets

Over a nine-year period (2008–2016), state and municipal pension funds embarked on a grand experiment. They boosted their commitments to alternative assets, spending tens of billions of dollars per year on additional third-party money management fees. The funds’ diversification strategy covered a variety of tactics involving mostly private, but some public, assets. The ostensible purpose of this expenditure was to realize both (i) greater returns and (ii) lower volatilities than those that were produced by the low-cost indexing of publicly-traded investments, which mimicked the funds’ actively-managed asset allocations. This paper compares aggregate public pension fund returns and volatilities, over differing time periods, with a series of institutional benchmarks and replicating indexes. We conclude that the states and municipalities obtained neither lower risk nor higher returns with the higher level of active management and diversification implied by alternative assets. The experiment is thus a failure.

Discrepancies in the evaluation of incapacity for work in a patient with epidermolysis bullosa acquisita between public pension fund and occupational medicine expert raise the issue of competencies

Abstrat A 50-year-old female patient suffering from a severe form of epidermolysis bullosa acquisita (EBA) took legal action against the Croatian Pension Insurance Institute (CPII) in an attempt to overturn their assessment that she was no longer capable of working as a seamstress but still capable of doing administrative jobs. Her claim was that she was not capable of doing any job at all. She was first diagnosed EBA in 2000, and the disease progressed slowly with intermittent remissions. In 2012, skin erosions appeared on her feet, followed by the loss of all toenails and lesions and infiltrations on the tongue and oral mucosa. Her whole body was covered in oozing wounds, she was in pain, and parts of her skin would stick to fabric while changing clothes or bandages. The most recent findings showed oesophageal stricture. She can consume only liquid food and is on the waiting list for receiving a feeding tube. The occupational health expert witness confirmed that the patient was generally incapable of work and was fighting her life. The judge and CPII lawyers fully accepted this report and the earlier assessment was overturned. To avoid incompetent assessments of working (in)capacity in the future, CPII and similar institutions should engage occupational medicine specialists to work in their assessment teams.

Causes and Ramifications of Public Pension Fund Underfunding

The problem of public pension plan underfunding has grown increasingly acute in recent years for numerous states and cities including Illinois, New Jersey, Connecticut, Charleston, Chicago and Philadelphia. Underfunded pension systems have profound implications for state and local governments' ability to provide basic services to their citizens and calls into question the retirement security of their public employees. The history of the severely underfunded New Jersey pension funds will be examined in order to understand how the current crisis developed. Economic and demographic changes, conditions in the capital markets, political and budgetary priorities and pressures, and actuarial conventions will be examined in order to highlight how the crisis is the result of the complex interaction of social, political and economic forces. The primary focus will be on how the capital markets influence the funding levels of pension systems and the options for government action.

Public-sector Contracting for Investment Services

In Chapter 7, the focus shifts to public agents and the process of contracting financial services and local pension funds in the US states. The costs of governing and managing this sector are addressed and an idealized model of the institutional design, administration, and supervision of the investment management process is introduced, laying out the forms and functions of pensions in relation to their beneficial purpose. In a brief overview of the US state and local PERS sector, its economic significance and distinctive institutional ecology are noted. The authors’ research demonstrates the extent to which the market for financial services in the US public pension-fund sector is Balkanized, implying significant transaction costs for both the buy and sell sides of the market, more often found at the city or metropolitan level than among funds within states or between funds of adjacent states.

THE ANALYTIC APPROACH FOR THE STOCHASTIC PROJECTION OF THE PUBLIC PENSION FUND

In this paper, we propose a stochastic method to project the public pension fund in the public pension system (PPS). For this we introduce the stochastic differential equations for the three parts: the premium revenue, the benefit expenditure, and the fund process. From these we show that the solution of the aggregated fund process is the sum of log-normals, which is approximated as one log-normal for the analytic result. Related to the parameter estimations, we implement the moment matching in the first moment. For the second moment, we apply the extreme value method following Parkinson. In order to follow Parkinson, we take the maximum and the minimum range of the fund amount based on the various sensitivity result as well as the baseline one from the deterministic projection result. In this reason, it is naturally to maintain the close interrelation with the deterministic projection result, which is very important since it is still key result in the actuarial valuation of the PPS.