🏡💚 Investing in fossil fuels as "climate solutions"
California is home to the United States’ largest pension fund. The California Public Employees’ Retirement System (CalPERS) manages over $500 billion in assets for millions of workers and retirees, including dedicated investments for climate solutions. It turns out that some of those “climate solutions” include direct holdings in major oil and gas companies, and the worst emitters in greenhouse gases.
You’ve probably heard of efforts to force CalPERS to divest from fossil fuels — our coalition has supported legislative efforts to do this, most recently with SB 252 authored by Lena Gonzalez, which died in committee last year. Divestment has been a climate strategy and demand for many years, resulting in significant victories across the world. Student campaigns have successfully pressured universities to divest from fossil fuels, including the University of California and the California State University. Major public employee pension funds have also divested, including the Netherland’s ABP, which is the fifth largest public employee pension fund in the world, as well as the public pension plans of Los Angeles City, Baltimore, Chicago, New York City, and the District of Columbia.
Pension funds are especially compelling targets for divestment because they are concerned with ensuring a strong and stable future for its members. Most concretely, that means financial security in retirement, but more holistically many pension funds understand that they are almost literally an investment in the future. CalPERS acknowledges this on their website, saying “the long-term nature of our benefits reflects our long-term investing horizon and our commitment to generations of public employees.” Having a livable planet seems like an important piece of a stable future, so there is an easy argument to be made that investing in companies that are actively destroying the planet runs counter to this commitment.
Although the divestment bills have so far been unsuccessful, they have contributed to pressure on CalPERS to develop a climate strategy for its investments. In 2023, CalPERS announced a $100 Billion Climate Action Plan, committing to a wide array of climate solutions like clean energy, water management, disaster risk reduction, and adaptation.
This was a meaningful, if albeit insufficient and incomplete, step forward. Lena Gonzalez and supporters of divestment said as much in a statement following CalPERS’ announcement. In that statement, Quinn Eide of Fossil Free California also made a very prescient warning: “while we welcome and appreciate CalPERS’ newly announced steps toward climate investments, sustainable investing cannot include fossil fuel companies.”
According to a new report, CalPERS celebrated Climate Action Plan does, in fact, include fossil fuel companies. Earlier this month, the California Common Good released a report showing its findings based on a public records request to learn more about the Climate Action Plan’s portfolio. Their analysis revealed that this portfolio contains billions of investments in the five worst U.S. emitters of greenhouse gases, most of the world’s largest oil companies, and other major air polluters. This includes holdings in BP, Chevron, Exxon Mobile, Shell Oil, and the most polluting utility companies (e.g. Vistra Corp, Duke Energy).
This is actually only a part of the whole picture. CalPERS only disclosed $25.7 billion of their supposed climate investments, omitting an additional $25 billion that they claim to have invested as part of the Climate Action Plan.
So is the Climate Action Plan a complete sham, or is there some explanation for this? Well, there seems to be an explanation, but it is absurd to the point of seeming downright deceptive. These fossil fuel investments appear to be the result of a creative accounting method that classifies portions of public equities as climate investments based on that company’s green business activity. In essence: investing in greenwashing.
The report got CalPERS attention. About ten days after the report was released, CalPERS sent a public letter to California Common Good to “set the record straight.” Strangely, though, the letter does not dispute the central findings and arguments of the report. It quibbles with a relatively small amount of money that is invested in green bonds. As a follow up memo from California Common Good notes, they may not disagree with the central point in question. In CalPERS’ letter, they state, “The inclusion of low-carbon initiatives from legacy energy companies seems to be California Common Good’s primary objection to CalPERS’ climate strategy.” Yes, I think that’s the objection — one I strongly agree with.
CalPERS has made clear that so far they are not committed to full fossil fuel divestment. But on top of that, to say that their climate portfolio should be allowed to include fossil fuel companies and major polluters is outrageous.
In an exclusive with Bloomberg, Crystal Zermeño of California Common Good is spot on when she asks, “What’s the purpose of this $100 billion fund? “Is it about math and what gets counted—or is it about reducing climate risk to beneficiaries?”
California Common Good is a coalition of labor, community and environmental groups, anchored by ACCE, United Teachers Los Angeles, and AFSCME 3299. They’ve worked closely with Fossil Free CA, and other climate groups on this as part of an overall strategy to influence worker pensions. That strategy includes efforts to divest from harmful corporate real estate companies like Blackstone, and to shift investments toward affordable and social housing.
This campaign represents a huge opportunity to bring together workers, climate, community, and housing groups around common demands for a shared vision of the future. There have already been several protests calling out CalPERS, and I’m sure more to come. If meaningful climate divestment is important to you, I encourage you to stand with labor and community partners in support and join in. You can sign up for updates on their website, and reach out to me if you’d like to be more plugged in to these campaigns.
Source: California Common Good website
WHAT WE’RE READING
California Pension Fund Labels Chevron and Saudi Aramco as Climate Investments (Bloomberg)
Tenants At The Center: An Equitable Path To Building Decarbonization (SAJE) — new report from SAJE! I’ll write about this sometime soon…
Settlement reached in lawsuit that challenged housing project in fire-prone South County (San Diego Union-Tribune)
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