That sinking feeling:

Investors who once considered their retirements safely protected wake up to a sinking feeling of uncertainty and gloom.

Sound like the great mortgage-fueled financial crisis of 2008? Sure. But it also describes a calamity likely to hit as soon as 2009.

State, local, and private pension plans covering millions of government employees and union workers with “defined benefit” accounts are teetering on the brink of implosion, victims of both a sinking stock market and investment strategies influenced by political considerations.

As pension funds grew and grew, the temptation emerged to use them to promote political causes rather than focus only on getting the best return for future pensioners.

So holdings in unfashionable countries (eg apartheid South Africa, now Israel) and product-sectors (eg cigarettes) were pronounced to be morally intolerable investments.

Which was fine as long as everything was whirring along nicely.

But funnily enough it turns out that if you want pension funds to deliver, er, pensions when things get tough, the best investments to have are in those sectors which make money:

In many instances, SRI amounts to union leaders or politicians gambling with other people’s money in support of ideological vanity.

What will be the cost of ‘socially responsible investments? Or, more importantly, their value?

Again, you can evade reality, but you can’t evade the consequences of doing so…