Kutak Rock attorneys Carlton Fearon and Marc Lieberman authored the feature article in the April 2025 edition of The NAPPA Report, the official publication of the National Association of Public Pension Attorneys.

Titled “ESG Investing in Public Pension Funds After Spence v. American Airlines,” the article explores the evolving landscape of ESG (Environmental, Social, and Governance) investing and its implications for public pension plans in light of recent legal developments.

In their analysis, Carlton and Marc examine the Spence v. American Airlines decision, in which a federal court held that the trustees of American Airlines’ defined contribution retirement plans breached their fiduciary duties by allowing ESG objectives—particularly those advanced by their investment manager, BlackRock—to influence plan decisions. Although the court did not find a breach of the duty of prudence, it ruled that the fiduciaries failed in their duty of loyalty under ERISA by prioritizing corporate ESG goals over participant financial interests.

While the decision directly impacts private plans subject to ERISA, the article emphasizes its broader significance for public pension systems, which are generally governed by state fiduciary laws. Carlton and Marc warn that public plan fiduciaries may also face increased scrutiny and liability risks if ESG factors are not carefully balanced against financial outcomes and fiduciary responsibilities.

The article provides clear, practical guidance for public pension fund administrators, including:

• Ensuring that ESG investments demonstrably enhance risk-adjusted returns.
• Conducting rigorous due diligence on asset managers’ ESG strategies.
• Avoiding conflicts of interest between investment objectives and corporate partnerships.
• Prioritizing transparency and independent oversight in manager selection.

Carlton and Marc conclude that while ESG investing remains a growing trend, especially among younger generations, fiduciaries must maintain a disciplined approach that upholds their primary duty: acting in the best financial interests of plan beneficiaries.

Marc has served as outside general, investment and fiduciary counsel for many large statewide public pension plans throughout the United States.  He has also represented numerous public pension plans, sovereign wealth funds, insurers and banks in connection with their alternative investments.  Several administrators of state-wide pension systems have recognized him as one of “the most knowledgeable and experienced public pension lawyer in this State.” 

Carlton’s practice focuses on corporate law, mergers and acquisitions, and institutional investments. With a robust background in both legal and business environments, Carlton brings a unique blend of analytical prowess and strategic insight to his practice. He assists the National Institutional Investments Group with advising investors, pension funds, banks, and insurance companies, on a wide range of investment-related legal matters. Carlton has a deep understanding of the regulatory landscape and investment strategies, providing clients with comprehensive legal counsel tailored to their unique needs. His expertise encompasses fund formation, private equity, hedge funds, and compliance with federal and state securities laws.