A leading opponent of environmental investing is helping lead Kansas’ public pension system

A leading national opponent of public pensions and government agencies prioritizing investments with environmental and social justice goals recently joined the board overseeing Kansas’ public pension system and its $25 billion in assets.

Derek Kreifels became a member of the Board of Trustees of the Kansas Public Employees Retirement System, commonly called KPERS, on July 21 after he was appointed by Kansas House Speaker Dan Hawkins, a Wichita Republican.

Kreifels is the CEO and co-founder of the Shawnee-based State Financial Officers Foundation, a national group aggressively opposed to public investments in companies guided by environmental, social, and governance, or ESG, factors. The broad term encompasses consideration given to climate change and social issues in making investment decisions.

Republican officials across the country have condemned the practice and 14 states, including Kansas, passed anti-ESG laws this year, according to a report released by Pleiades Strategy, a firm that encourages action on climate change. ESG critics say investment decisions should be guided solely by fiduciary responsibility.

The investment decisions of public pension systems in particular are economically significant because they collectively hold about $5.3 trillion in assets. Over time, changes in the systems’ investment strategies could affect corporate decision making.

While Kreifels is already a prominent face of the anti-ESG movement, the KPERS board appointment gives him the power to directly influence a public pension system with billions in investments and more than 325,000 members.

“I think that it’s any pensioner’s duty to be laser-focused on fiduciary responsibility,” said Kreifels, who served as assistant Kansas state treasurer from 2010 to 2016, a period spanning Democrat Dennis McKinney and Republican Ron Estes’ tenures as treasurer.

“Any time that any issue, whether it’s ESG or something else, comes up that starts to potentially influence an investment decision that isn’t fiduciarily focused, it would be an issue.”

ESG supporters warn the GOP-backed measures risk a focus on short-term returns at the expense of long-term benefits. For example, clean energy investments now may not lead to large returns immediately but could eventually prove valuable as society transitions away from fossil fuels in the decades to come.

“The whole anti-ESG mindset to me, I think, it’s very short-sighted. The real benefit of information on ESG is it gives fund managers and companies an idea of what and how a potential company you’re going to invest in – what their future could hold,” said former Democratic Kansas Treasurer Lynn Rogers.

If companies aren’t taking environmental and other factors into consideration, “I think long-term investments in those companies are going to be difficult to sustain,” Rogers said.

As a trustee, Kreifels is only one voice on a nine-member board. The board includes Republican Treasurer Steven Johnson, four members appointed by Democratic Gov. Laura Kelly, two members elected by pension system participants and a member chosen by Kansas Senate President Ty Masterson, a Republican, in addition to Kreifels.

But Kreifels joins with an outsized bully pulpit. From his position leading the State Financial Officers Foundation, he speaks frequently about what he views as the dangers of ESG.

In a February article in the conservative magazine National Review, Kreifels recounted actions across the country in 2022 to fight the use of economic, social and governance factors in investing. While it’s “front-page news today,” not too long ago few Americans had heard of the term ESG, he wrote. He wrote that ESG opponents can’t rest until they have regained control from “those who would hijack them for political purposes.”

Kreifels this spring appeared on the podcast of Jordan Peterson, a Canadian psychologist who is a highly popular commentator among some conservatives, where he noted the oil and gas industry is the signature industry in some states.

“We’re saying, ‘look, we’re market participants, too. We don’t have to use your bank or your fund manager to manage our billions of dollars in business if we think you’re actually trying to hurt the primary industry of our state,” Kreifels said on the podcast.

A New York Times investigation last year found a coordinated effort among Republican state treasurers to thwart climate action at the state and federal level, and placed the State Financial Officers Foundation at the center of the endeavor.

In a statement, Hawkins said Kreifels’ experience and qualifications make him an outstanding addition to the board.

Kreifels helped form the State Financial Officers Foundation in 2012 while working in the Kansas State Treasurer’s Office. He holds a bachelor’s degree in communications and public relations from Wichita State University and a master’s degree in management from Friends University in Wichita. He was also secretary of the Kansas Republican Party from 2013 to 2017.

“There is truly no one better to ensure that KPERS is serving the long term financial interests of state retirees and not those of radical special interest groups,” Hawkins said.

Rep. Rui Xu, a Westwood Democrat and the ranking minority member on the Kansas House Financial Institutions and Pensions Committee, hesitated to comment on Kreifels’ appointment given that he doesn’t know him, but he said he hopes Kreifels “adheres to what I think we all want, and that is maximum returns for KPERS.”

Kreifels joined the board less than a month after a new Kansas law went into effect designed to limit the influence of ESG within government. The law, HB 2100, requires KPERS and its investment managers and contractors to operate solely in the financial interest of its participants. It blocks state agencies from granting preferential treatment or discriminating against businesses based upon environmental, social and governance criteria.

Kelly allowed the bill to become law without her signature, though it passed in largely party-line votes that fell short of a veto-proof majority. In a statement this spring, the governor said she had “reservations about the potential unforeseen consequences” of the legislation on state and local governments.

Ernie Claudel, a member of the KPERS Board of Trustees who also helps lead the Kansas Coalition of Public Retirees, said he doesn’t think the Legislature realized the ramifications of the anti-ESG bill. He warned that if the investment returns begin slipping, employers will have to contribute more to the system.

“You’ve got to be careful,” Claudel said. “You don’t want to get the dominoes falling the wrong way.”

The law doesn’t go as far as a version of the bill passed by the Kansas Senate that would have also ordered KPERS to divest from investments with foreign adversaries, as defined by federal regulations. As of March, that list included China, Cuba, Iran, North Korea, Russia and the regime of Venezuelan President Nicolas Maduro.

KPERS Director Alan Conroy testified in opposition to an early version of the bill, saying in written comments that the pension system’s board has carefully built an investment portfolio to provide the highest returns while minimizing risk. He wrote the Legislature already addressed social investing when it passed a law in 1992 prohibiting investments if the sole or primary purpose was for economic development or social purposes.

“All investment decisions are made for the sole purpose of providing promised benefits,” Conroy wrote.

Kreifels said the new Kansas law represents “really good work” by legislative leaders. He demurred when asked if the law should go further.

“The Senate members and the House members have to do what they feel like is the best interest of their districts, the best interest of their constituents and I don’t pretend to know what that is,” Kreifels told The Star.

Kelly Arnold, a former KPERS trustee and former chairman of the Kansas Republican Party, said he was excited to learn of Kreifels’ appointment, given both his past experience in the Kansas State Treasurer’s Office and in his role with the State Financial Officers Foundation. Arnold expressed support for the new state law.

“Because it keeps the focus of the KPERS trustees on that goal of having the best return for the members’ money and not politics,” said Arnold, who is also the Sedgwick County clerk.

Xu said the legislation was unnecessary. Like Kelly, he said he worried about unintended consequences.

“It was just kind of a reactionary piece of legislation to what talk show radio hosts were doing,” Xu said.