Trillions of dollars in retirement funds are being used to push controversial political agendas. Asset managers of state pension funds use their positions to vote for activist resolutions at shareholder meetings. The 1792 Exchange, a nonprofit group helping businesses move back to political neutrality, analyzed the proxy voting records of every state pension. The data show that asset managers voting on behalf of state pension holders have supported controversial resolutions at major corporations that would implement policies enforcing arbitrary environmental, social, and governance goals, racial “equity,” abortion travel benefits, and more.

These asset managers have violated their fiduciary duty, and these attempts to undermine democracy using public pension funds need to be made illegal.

A database we made public tracks the 2022 proxy voting records of the asset managers who vote on behalf of all 50 states’ pension funds (including the public records of the 19 states that publish their proxy votes). Many pension funds for state and municipal employees, including teachers and first responders, are underfunded, and taxpayers should be able to assume these funds are managed in a way to maximize returns. The data show that, in recent years, asset managers, including BlackRock, State Street, Morgan Stanley, Goldman Sachs, Franklin Templeton, PIMCO, JPMorgan, Northern Trust, Principal, UBS, Blackstone, and many others, treat state pension funds as if they are ideologically focused, activist investment funds, instead of a way for the middle class to invest in fiscally responsible businesses and attain financial security.

The data reveal hundreds of examples of proxy votes affirming shareholder resolutions that are entirely unrelated to the financial health and underlying value of the companies in which state pensions are invested.

For example, the funds were used to vote for resolutions designed to force third-party “racial equity audits” at companies such as Amazon, Apple, Chevron, Home Depot, and Wells Fargo. One resolution for shareholders of Walmart would have forced the company to “report evaluating any risks and costs to the company associated with new laws and legislation severely restricting reproductive rights.” Another required Comcast to align its retirement plan options with climate goals.

It’s not just blue states backing these measures. The Texas retirement system voted for a shareholder resolution at Costco that asked the company to waste its time and resources trying to meet the Paris Agreement greenhouse gas emissions standards.

Asset managers who vote for activist resolutions jeopardize the returns on state employees’ retirement investments, put taxpayers at risk, and subvert the democratic process. It is unethical to use retirement investments as a weapon to turn corporations into the enforcers of a political agenda that voters would reject. Even those who support the goals of ESG should condemn this practice as antidemocratic.

Despite opposition from banks and financial services giants, some legislatures are leading the way in making this egregious practice illegal. Texas led with the first bill in 2021, prohibiting the state from contracting with companies that boycott the state’s most vital industries, such as oil and gas. It severed ties with asset managers, including BlackRock. In 2022, four states passed some type of anti-ESG legislation. This year, 15 states enacted ESG-related bills, with most on fiduciary duty in pensions or economic boycotts. Some were robust, some weak.

Kentucky passed HB236, a strong model requiring that fiduciaries of state retirement systems consider the sole interest of the beneficiaries of the pension plan using only pecuniary factors and prohibiting consideration of nonfinancial interests such as ESG and other ideological interests. This was smart for the pensioners and the state’s entire economy. The S&P 500 Energy (Sector) has outperformed the S&P 500’s ESG Index by a whopping 30% over the past three years, and Kentucky is a coal producer.

Bills also passed in Arkansas, Kansas, Montana, Florida, and West Virginia to begin regaining control over their investments or proxy votes. Every state should follow suit to protect state employees and core industries.

This matter isn’t relegated to just state pension funds, and there is a good chance your private 401(k) won’t maximize your returns because it has been weaponized to advance a political agenda that would never earn your vote. Asset managers and proxy advisory firms such as ISS and Glass Lewis violate their fiduciary duty when they use nonfinancial criteria to make investment decisions and vote proxies.

Pension fund boards and staff must be held accountable for their legal and fiduciary duties. Governors and others who appoint the board members must be more careful. State legislators must pass strong bills. And if asset managers in Greenwich want to perform “racial equity audits,” then they can volunteer to perform one for their country club, but they must stop using middle-class retirement funds to vote for ESG goals.

Paul Fitzpatrick is president of the 1792 Exchange, an organization dedicated to advancing freedom by protecting small businesses and nonprofit groups and moving corporations back toward political neutrality.