Will California’s largest pensions, CalPERS and CalSTRS, divest from fossil fuels?
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Climate activists and retirees have pushed retirement funds in Maine and New York to sell their stocks in fossil fuel companies. The push is called “divestment”, and it’s a move that the University of California has embraced as well.
Now, divestment may be coming to more pensions near you.
The California Legislature is considering a bill that would require the pension funds for state workers and teachers to sell holdings in the 200 largest publicly traded fossil fuel companies by July 2031. The bill would also stop the funds from making new investments in those companies starting in 2024.
These pension funds aren’t simple bank accounts, they’re big-time institutional investors. The California Public Employees’ Retirement System has about $459 billion in assets, making it the largest public pension fund in the nation and one of the largest private equity investors in the world according to the agency’s website. When it changes tack, the world of finance takes note.
The California State Teachers’ Retirement System is the second largest public pension fund in the U.S. Together, the two pension funds cover more than 3 million Californians and their families.
Proponents of the bill say it’s important that California put its money where its mouth is, so to speak, on climate policy. Foes of the move say anything that might hurt investment returns should be off the table.
“We’re not saying the intentions around this are not good,” said Marcie Frost, CEO of CalPERS, in an interview with CalMatters. “But they’re not coming through an investor lens. It feels like they’re coming through a morality lens. And we can’t use our own personal values, or our personal morals, to be able to decide how we invest the assets of this portfolio.”
Both pensions are underfunded; if either had to immediately pay out all the benefits they owe, they wouldn’t have enough money.
If CalPERS and CalSTRS shed their investments in the largest oil and gas companies, what would it mean for the teachers and state workers counting on their retirement checks?
Why climate activists are pushing for divestment
For some, it would be a relief.
“When I was younger, I was told by the adults around me that I should work toward obtaining a career with the state of California,” said Francis Macias, a state parks employee who called into a pension fund board meeting in March. A member of the advocacy group Fossil Free California, she said those same adults had told her such a job would come with perks like stable hours — and a nice pension.
But now, Macias said, “I feel like I’m living in a nightmare. Every day, I experience great anxiety knowing my hard-earned pension is funding climate collapse.”
The state worker pension fund has an estimated $9.4 billion in energy company investments it would have to divest under the proposed bill, about 2% of the fund. On the list are companies you’ve probably heard of, including Exxon Mobil and Shell, and ones you probably haven’t, such as Ovintiv Inc. and Cenovus Energy. The teachers’ pension fund would have to divest an estimated $5.4 billion, or about 1.7% of its assets.
The bill’s backers include many environmental and climate groups, as well as some unions representing workers who receive pensions, such as the California Faculty Association and the California Nurses Association. But there are other unions, like the California Professional Firefighters and the State Building and Construction Trades Council, that oppose the effort, along with California State Retirees, an organization for retired state workers, and the leadership of the pension funds themselves.
The goal of divestment pushes, climate advocates say, isn’t to directly reduce emissions.
“It’s about calling (fossil fuel companies) out on their immoral activities, and the political consequences of that, which is weakening them politically, so that politicians stop taking their money and politicians stop doing their bidding,” said Carlos Davidson, a retired faculty member of San Francisco State University who receives a pension. He worked on a divestment campaign at the university, and has been involved in the push to divest the state workers’ pension for nearly a decade.
“It is true that divestment does not have direct financial impacts on companies,” Davidson said. “It’s the political effects that really matter. And that is a harder, longer-term, more fuzzy process.”