→ Retirees clash with the managers of their money. As Tesla’s stock plummets and its CEO Elon Musk alienates investors with his political activities, some pension plan participants are saying enough is enough. California’s two largest public pension funds, CalPERS and CalSTRS, are under pressure to divest from the EV company as retirees demand accountability from a company they say no longer aligns with their values or financial interests.

“Politics aside, Tesla is suffering due to Elon Musk’s mismanagement of the company,” said one CalPERS participant, calling the company “widely overvalued.” Another retiree in the $503 billion state plan was even more blunt: “I am embarrassed and appalled that my pension program is supporting white supremacy.”

At the $353 billion CalSTRS, retirees turned up the heat at its March 12 meeting, with the board receiving 38 formal requests to dump Tesla before the gathering even began. Ruth Radetsky, a CalSTRS participant, laid it out plainly: “There are compelling financial arguments to divest: an absent CEO, technology that is years behind promised delivery dates. But mostly, I don't want my financial safety tied to the financial safety of Elon Musk — a man who is delighting in destroying the country I love, the country he thinks he bought.”

This comes as investors are increasingly dismayed at Musk’s involvement in global politics. One overseas pension, the $20 billion Danish AkademikerPension, plans to sell its Tesla shares and blacklist the company, since, in CEO Jens Munch Holst’s words, Musk is “destroying Tesla’s brand and value.” 

While calls for divestment grow, allocators in the U.S. remain skeptical about its effectiveness. Divestment, they argue, is largely symbolic and a logistical headache for little payoff. Individual stock holdings make up tiny fractions of massive portfolios. For example, CalPERS holds roughly $2 billion in Tesla — barely 0.4 percent of its portfolio. (Reps for CalPERS and CalSTRS declined to comment on taking any action regarding Tesla.)

Plus, it’s not as simple as just selling. Managers only run separately managed accounts — which would allow them to sell off Tesla — for the largest plans. Stocks are often spread across ETFs and other commingled funds managed by different firms, making divestment far more complicated than advocates may realize. Unless there’s an organized global effort to blacklist a company or sector, a single plan selling off its stake won’t move the needle. 

But we have seen these efforts before — and seen them work. In the 1980s, students pitched tents and staged hunger strikes to push universities to cut financial ties with South Africa as part of a broader global movement against apartheid. By the decade’s end, more than 150 colleges and universities had divested, joining governments and corporations in applying economic pressure that helped dismantle the regime. (A CalSTRS retiree pointed to South Africa divestment as proof that collective action works.) We also saw a similar campaign play out in the 1990s with the tobacco divestment movement. But if such disinvestment efforts are to be effective, they require a massive number of participants and a significant amount of time.

Protests and demonstrations against Tesla are continuing to occur around the globe, putting pressure on its market performance and causing analysts to lower their price targets for the car manufacturer’s stock. Could these global protests and boycotts that are popping up around the world coalesce into a more coordinated divestment push? Guess we’ll have to wait and see.

At its core, the debate over Tesla is about ESG investing. As managers drop diversity programs amid the political backlash and get quiet on their ESG offerings, pensions may just try to ignore Tesla for now. This debate also highlights a broader question about the role of values in investing. Should pension funds and other institutional investors prioritize long-term returns above all else, or should they also consider the social and ethical implications of their investments?

For now, the answer seems to depend on whom you ask. But as protests grow and more retirees demand accountability, allocators may find it increasingly difficult to ignore the voices calling for change.

While it’s true divesting rarely changes corporate behavior and retirees may not fully grasp its complexities, allocators could do more to educate them. It is, after all, their money.

I am certain you all have thoughts on this, and I welcome them. So, send me a note at james.comtois@institutionalinvestor.com to give me an earful. Don’t worry about me — I can take it.