KPPA Releases Fiscal Year 2023 Annual Report

The Kentucky Public Pensions Authority, a $24.9 billion system overseeing all of the public pensions in the state of Kentucky, released its annual comprehensive financial report, covering fiscal year 2023, which ended June 30, 2023.

The KPPA oversees the County Employees Retirement System, Kentucky Employees Retirement System and the State Police Retirement System funds. The total return of all pension funds was 9.54% in fiscal year 2023, a significant increase from 2022’s 5.3% loss. The total return of all insurance trusts was 10.15% in fiscal 2023, up from negative 5.34% last fiscal year.

Funded status increased across all tracked pension systems, although funded status continues to be abysmal for the KPPA system. CERS and KERS are divided into hazardous and nonhazardous funds, based on the types of work done by those covered in each fund. CERS NH funded status increased to 56.1% in 2023 from 52.0% in 2022, while CERS H increased to 51.4% from 47.6%. The funded status of KERS NH and KERS H rose to 21.8% from 18.5% and to 65.4% from 63.2%, respectively. The funded status of SPRS rose to 54.0% in 2023 from 52.5% in 2022. In 2018, the funded statuses of all these pension funds were 52.7%, 48.4%, 12.9%, 55.5% and 27.1%, respectively.

The increases in funded status were a result of strong investment returns, as well as funding that was approved by the state’s legislature. In total, contributions of $240 million were made to KERS NH for fiscal year 2023 and 2024 and $215 million for SPRS for fiscal year 2023.

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The one-year returns for all tracked pension and insurance funds are as follows:

CERS – 10.24%
CERS Hazardous –10.33%
KERS – 6.96%
KERS Hazardous – 9.46%
SPRS – 7.58%
Total Pension: 9.54%

Insurance fund returns:

CERS – 10.33%
CERS Hazardous –10.11%
KERS – 9.87%
KERS Hazardous – 9.29%
SPRS – 9.46%
Insurance Total – 10.15%

The KPPA manages the pensions and insurance for approximately 421,069 members, who are current and former Kentucky state employees, as of June 30, 2023.

Despite Record Returns, Kentucky’s Pensions Remain Severely Underfunded

Kentucky Public Pensions Lose 5.7% in Fiscal Year 2022

Tags: Kentucky, Kentucky Public Pensions Authority, KPPA

Kommunal Landspensjonkasse, Norway’s largest pension system, will divest from several countries due to environmental, social and governance and human rights concerns. The fund added 12 companies from Saudi Arabia, Qatar, the United Arab Emirates and Kuwait to an exclusion list, forbidding the pension fund from making investments in these companies.

The excluded companies, which are primarily within the real estate and telecom industries, include Emirates Telecom Group, Saudi Telecom, Emaar Properties, Aldar Properties, Etihad Etisalat, Mobile Telecommunications, Dar Al Arkan, Ooredoo, Mobile Telecommunications Co. Saudi Arabia, Mabanee, Barwa Real Estate and oil giant Saudi Aramco.

“KLP has excluded 11 of these companies because it considers that there is an unacceptable, sector-specific risk of contributing to human rights abuses,” stated the pension fund’s report, “Publication of the decision following a due diligence assessment of companies in the Gulf States,” announcing the exclusions.

Several of the real estate firms were added to the exclusion list because of allegations of labor rights violations. Telecommunications firms were excluded due to concerns over freedom of the press and freedom of expression in the countries, according to the pension fund’s report.

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Saudi Aramco was excluded for a failure to commit to climate transition plans, according to KLP. The pension fund has a goal of reducing greenhouse gases and becoming net zero by 2050 within its operations and its portfolio. It notes that Saudi Aramco is last in a ranking of oil and gas companies’ climate-related goals and transition plans by the Carbon Tracker Organization, which ranked 25 companies in the sector.

“Based on an overall assessment of the company’s close ties to an authoritarian state and an active position in opposition to KLP’s expectations regarding oil and gas companies’ climate change and energy transition plans, it has been decided to exclude Saudi Aramco from KLP’s investments,” the fund’s report stated.

KLP conducts due diligence on existing and prospective investments to make sure any allocation is aligned with the pension funds’ goals and values. The fund announces exclusions almost monthly and has excluded companies in the alcohol, gambling, weapons, tobacco and coal industries, as well as Russia-linked companies. The fund has made eight such announcements this year. “We believe that being transparent about exclusions, including their rationale, is about taking responsibility for our choices,” according to the KLP website.

“By doing so, we genuinely hope and believe this will lead to change. In the same way that we demand transparency from the companies in which we invest, we must be open about our work in relation to our customers and other stakeholders. We continue to engage in dialogue with excluded companies with the aim of encouraging them to implement the changes needed to be once again suitable for investment.”

KLP currently manages 972.3 billion kroner ($95.839 billion) in assets, as of the end of the third quarter 2023. By the end of the third quarter, the fund has returned 3.9% YTD. The fund’s assets have increased by 72.2 billion kroner ($7.6 billion) through the year’s third quarter.