One of the most striking trends in global development finance over the past decade has been the rise in private equity financing in middle-income countries. Equity financing, which refers to the method by which publicly traded corporations in the emerging markets raise long-term capital through the sale of shares (equity) to investors, has been a central feature in boosting private debt levels in emerging markets in the new millennium (World Bank 2006). Because they are major suppliers of capital to emerging markets, US pension funds have played a leading role in monitoring and measuring financial risk – or what is known in the industry as ‘benchmarking’ – through the inclusion of non-financial or social risk factors such as good human rights policies. Although many institutional investors would not deem their use of non-financial indicators as socially responsible investing (SRI), which is often associated with the rise of ethical awareness, the discourse and objective driving the inclusion of social factors mirrors the same concern as SRI, namely: the reduction of risk exposure. Over the past several years, the investment community has expanded their narrow economic perspective regarding risk calculations. According to the United Nations Principles for Responsible Investment, for instance, ‘There is a growing view among investment professionals that environmental, social and corporate governance issues can affect the performance of investment portfolios’ (www.unpri. org/about). Despite the increasing use of social indicators as a method of reducing risk, pension funds have not been subjected to critical analysis. This chapter addresses this neglect in the literature by providing a critical analysis of the non-financial risk factors employed by the California Public Employees’ Retirement System (CalPERS). With a market value of about $240 billion, CalPERS represents one of the largest pension funds in the world. CalPERS is also well known for its proactive benchmarking system, most notably its Permissible Country Index (hereafter PCI or Index). The Index incorporates both financial and social factors when calculating the risk levels in 27 emerging markets. On the surface, the PCI has been celebrated to be a progressive means of encouraging middle-income countries to adhere to the principles of the International Labour Organisation, or freedom of the press. Indeed, some authors have suggested that the PCI has led to positive change, in that governments of emerging markets attempt to improve

on social criteria so as to make their countries more attractive to large, foreign investors like CalPERS (cf. Hebb and Wójcik 2005). Viewed at a deeper level, I argue that the PCI reproduces the neoliberal-led development paradigm, by naturalising ‘development’ as largely an uncontested, market-driven phenomenon (Soederberg 2009). The Index does this primarily through coercive measures, such as exit strategies (or, removing a country from its Index), as well as through attempts at constructing specific forms of knowledge that act to normalise the expansion and restructuring of spaces of capital in the global South. The remaining chapter is divided into the following three sections. The next section discusses the general emergence of SRI with regard to United States and outlines the non-financial risk factors of the PCI. The following section then provides a critical analysis of the PCI by identifying three main characteristics underpinning the Index that serve to naturalise the neoliberal development paradigm. The final section concludes by revisiting the argument and drawing out future implications of the Index.