May 11, 2011
When California State Teachers’ Retirement System Chief Investment Officer Christopher Ailman meets with representatives from Permira IV in New York next week, he’ll be talking about the unrest among teachers when it comes to investments in the fund that’s paid for developing the controversial fumigant methyl iodide. “They are aware there’s a growing concern,” he says.
“Concern” doesn’t necessarily mean divesting or hedging against the nearly $1 billion CalSTRS has committed to the private equity fund, but if CalSTRS decides the product violates its human health standards, it may dump its shares “as a last resort,” Ailman says. His preference is to leverage share ownership “to see if you can’t bring about change, or reduce the risk in some way.” After pressure mounted to sell stock invested in Sudan, “We sold the stock, but the situation really didn't change.” Still, CalSTRS opted to sell shares in certain oil companies with interests in Iran, and dumped all of its tobacco stocks a decade ago. “California says it’s legal, but we decided [tobacco] was not worth the return potential,” Ailman says.
This is the first time CalSTRS officers have spoken with the Weekly since the news broke late last year that the teacher’s pension fund had invested $968 million in Permira, which created Industrial Equity Investments Ltd. Japan, a vehicle specifically for purchasing Arysta, the manufacturer of methyl iodide.
And CalSTRS officers say they have been actively investigating health concerns since January in regard to methyl iodide. Though CalSTRS mostly defers to the Department of Pesticide Regulation to make determinations on what’s safe, the widely cited letter from 54 scientists (including a Nobel Prize winner) condemning the fumigant, “makes very compelling the dangers of this particular chemical,” Ailman says.
Ailman says he’s already articulated concerns about the Arysta investment to Permira. As to the theory behind investing in the fund in the first place, Ailman says the deicsion still holds up to scrutiny. Permira’s investments are mostly in fertilizer companies in Asia, which are used to grow more grain to produce more animal protein for a growing, and increasingly affluent global population.
Midas, Aliman adds, when stacked up against fertilizers in Asia, “is not terribly important to the company right now.” And he’s also apparently heard more from Arysta than anyone else about its business ambitions in California; the estimates reported to Ailman show an optimistic doubling of applications over just a year. Arysta expects 7 percent of strawberry fields in the state to use Midas this year, after the product was registered for use in December 2010, and 15 percent next year–optimistic growth, considering not a single grower’s yet received a permit to apply the stuff.