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A Win on Divestment is a Win for California Communities

By Reverend Lennox Yearwood Jr, Carlos Davidson, Luis Angel Martinez, Fatima Iqbal-Zubair, Ra’mauri Cash, and Bill McKibben - Fossil Free California, February 28, 2024

The Hidden Risk in State Pensions: Analyzing state pensions’ responses to the climate crisis in proxy voting

By Jessye Waxman, et. al - Sierra Club, et. al., January 2024

Climate-driven heat waves, droughts, floods, hurricanes, and wildfires are already causing suffering for hundreds of millions of people worldwide. Climate-driven impacts on the economy are already significant: according to one recent peer-reviewed study, the climate crisis inflicted a global economic toll of $16 million an hour in extreme weather damages between 2000 and 2019. Given that these impacts are occurring at only 1.2°C of warming, it’s no wonder that economists, financial institutions, and financial regulators are increasingly worried about the risk that the climate crisis poses to our shared economic prosperity.

“The financial impacts that result from the economic effects of climate change and the transition to a lower carbon economy pose an emerging risk to the safety and soundness of financial institutions and the financial stability of the United States,” concluded the Board of Governors of the Federal Reserve System, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency in a recent report, making it clear that climate-related financial risks are faced by all financial institutions and the broader economy. As long-term fiduciaries, pension funds should be among the investors most alarmed about the economic risk associated with the climate crisis. Some have taken public strides forward, such as announcing net-zero pledges, investing in climate solutions, or defending the right to invest responsibly. These are critical steps forward. However, as this report shows, the institutions responsible for stewarding trillions of dollars on behalf of the American people are failing to address climate-related financial risk in their proxy voting strategies, a key tool investors have to encourage responsible corporate governance and corporate behavior.

This report analyzes the nineteen state pensions in states where a state financial officer — such as the state treasurer, comptroller, or auditor — has indicated it is a priority issue to advocate for more sustainable, just, and inclusive firms and markets, and protect against climate risk. In addition to the nineteen state pensions, the report includes the five systems managed by the New York City Comptroller, who has also indicated these issues are priorities. These funds included collectively represent over $2 trillion in assets under management (AUM).

Download a copy of this publication here (PDF).

The Impact of Energy Investments on the Financial Value and the Carbon Footprint of Pension Funds

By Michael Zonta, Melanie Issett, Celinda Ma, and Olaf Weber - School of Environment, Enterprise and Development (SEED), University of Waterloo, June 26, 2023

This report presents the results of analyses conducted on a group of pension funds that face popular demands to decarbonize their investment holdings (Climate Safe Pensions Network (CSPN)). A key argument made by advocates is that fossil fuel-free portfolios would have seen superior investment performance during the last decade. The scope of the analyses includes the historical public equity investments of the funds and are based on data provided by either Bloomberg or Capital IQ2. The analyses were conducted between 2013 and 2022 for the funds with publicly accessible data. Data for eight of the funds were available, including:

Data for eight of the funds were available, including:

  • Alaska Permanent Fund Corporation (APFC)
  • Alaska Retirement Management Board (ARMB)
  • California Public Employees' Retirement System (CalPERS)
  • California State Teachers' Retirement System (CalSTRS)
  • Colorado Public Employees' Retirement Association (CoPERA)
  • New York State Teachers' Retirement System (NYSTRS)
  • Oregon Public Employees' Retirement Fund (OPERF)
  • State of Wisconsin Investment Board (SWIB)

if six of the eight U.S. public pension funds had divested 10 years ago, they would have been $21 billion richer, an average 13% higher return rate. These six pensions collectively represent approximately 3.4 million people.

Download a copy of this publication here (PDF).

California public pension divestment bill building momentum; passed Senate Labor and Judiciary Committees

By Shana DeClercq - Fossil Free California, April 18, 2023

Today, SB 252 – a widely-supported bill for CalPERS and CalSTRS to phase out fossil fuel investments – passed its second Committee hearing in the California State Senate at the Senate Judiciary Committee. After an opening statement from bill author Senator Lena Gonzalez (D), Long Beach), and expert testimony from Hannah Estrada, Youth vs. Apocalypse, and Ron Rapp, Legislative Director, California Faculty Association. The Committee opened the floor to in-person and phone call public testimony. Nearly 150 Californians called in or joined in person to support SB252 yesterday. The phone lines overflowed with Central Valley community members, Bay Area youth, organizational representatives, and pension beneficiaries from across California striving to make their enthusiasm for divestment heard.

Eight Senate committee members voted Aye, and the bill has been referred to the Senate Appropriations Committee. This momentum for public pension divestment comes as Californians recover from record-shattering floods, while also girding themselves for ever-lengthening wildfire seasons in the Western U.S. – climate impacts directly caused by the extraction, transportation, and burning of fossil fuels.

Carlos Davidson, CalPERS recipient and California Faculty Association member, gave the following statement: 

“What we are seeing with SB 252 is tremendous momentum, in no small part due to the strong labor support for divestment of CalPERS and CalSTRS. Just as our pensions are the largest in the United States, our union workforce that contributes to those pensions is also a force to reckon with. Unions supporting the bill, such as the California Faculty Association, AFSCME California, the California Nurses Association, the American Federation of Teachers California, and more, together represent over 470,000 California workers.” 

How Effective Has Engagement Been?

By Sheila Thorne - Fossil Free California, April 15, 2023

CalPERS insists engagement is the most effective way to address climate change. In 2017 it co-founded Climate Action 100+, a coalition of 700 large investors who engage with 167 of the worst carbon-emitting companies in order to promote climate awareness in the company's governance and persuade them to disclose the company's climate risk and reduce emissions to net zero by 2050.

How effective has it been?

An evaluation of the impact of CalPERS climate engagements authored by Dr. Clair Brown, Professor of Economics at U.C. Berkeley, profiles 10 major oil companies with which CalPERS engages. It shows that only five of the ten have set emissions targets of net zero by 2050, and none of them have set short or medium term emission reduction goals. There are no consequences for these failures. A review of the 2022 proxy season along with past votes shows that CalPERS usually continues to support directors regardless of a company's failure to make progress in reducing emissions.

CalPERS' own "Addressing Climate Change Report" ( June 2020) admitted that only 9% of companies in the Climate Action 100+ group had targets in line with the Paris Agreement goals and only 8% had lobbying efforts aligned with necessary climate action.

This report considered one of its "significant impacts of engagement" the fact that Shell announced targets for reductions every 3 to 5 years towards a goal of shrinking its net carbon by about half by 2050 and agreed to include its emissions across its supply and demand chains (Scopes 1,2, and 3). However, one half of net carbon emission by 2050 is hardly something to boast about. Worse, a Financial Times article (May 17, 2020) revealed a disclaimer at the end of Shells's announcement that it will NOT change its strategy or capital deployment plans in line with its announcement until society acts. Thus it is going ahead with a new project in Nigeria to produce 30 million tons of liquefied natural gas a year to meet with what it expects to be doubled demand by 2040. And, according to Carbon Brief, Shell's global energy vision "Sky 1.5" plans for continued use of oil, gas, and coal until the end of the century.

The CalPERS Report also claimed it an accomplishment of engagement that Chevron announced reduction goals for GHG intensity in production. However, Chevron at the same time announced plans to double its production in the Permian Basin over 5 years and expected 900,000 barrels by 2023; thus its overall emissions and especially Scope 3 emissions could only rise.

California is wary of taking this big step to fight climate change. One Democrat says it makes them ‘hypocrites’

By Joe Garofoli - San Francisco Chronicle, February 12, 2023

State Sen. Lena Gonzalez is calling out California as “hypocrites” when it comes to tackling climate change. 

Specifically, the Long Beach Democrat says the state’s massive public pension funds should put its money – $11 billion worth of investments in fossil fuel companies – where its mouth is, by divesting those funds from polluters and moving toward renewable energy sources.

Pension fund leaders say that divestment may sound good and feel good, but will “accomplish nothing” – and potentially put at risk the retirement benefits of teachers and other public-sector workers. 

Notably silent on this issue is California’s leading climate advocate: Gov. Gavin Newsom. And carefully watching this battle unfold from the sidelines – for now – is the politically powerful, 310,000-member California Teachers Association union. Just under 9% of its members are retirees.

Gonzalez would like to see Newsom take a more active position. She was a leader in writing the package of leading-edge climate bills that Newsom signed into law last year. 

But she’s dumbfounded as to why a state that has positioned itself as a leader by demanding electric vehicles, pledged to be carbon neutral by 2045, called a special session of the Legislature to penalize oil companies for “price-gouging” and is ready to ban gas-powered water heaters is balking at leveraging the massive economic power of its pension funds to force fossil fuel companies to be more green.

California Aims To Boot Dirty Investment With California Fossil Fuel Divestment Act (SB 252)

By Zachary Shahan - Clean Technica, February 9, 2023

California continues to be a climate and cleantech leader. One of its big recent announcements in this regard is that state policymakers have introduced the California Fossil Fuel Divestment Act (SB 252).

Naturally, this divestment move was stimulated by young adults, students. It was then introduced by Senator Scott Wiener (D-San Francisco), Senator Lena Gonzalez (D-Long Beach), and Senator Henry Stern (D-Los Angeles) in the California Senate. The package actually covers a range of topics. It is “a suite of bills that work together to improve transparency, standardize disclosures, align public investments with climate goals, and raise the bar on corporate action to address the climate crisis.”

One of the shocking stats that the parties use to emphasize the importance of this matter and the stunning reality of human-induced global heating is that 71% of greenhouse gas emissions to date have come from just 100 companies. “Without corporate action to reduce these emissions, California would be unable to meet its climate goals,” the state senators surmise. “At a time when rising anti-science sentiment is driving strong pushback against responsible business practices like risk disclosure and ESG investing, these bills leverage the power of California’s market to continue the state’s long tradition of setting the gold standard on environmental protection for the nation and the world.”

How Unions Are Fighting for Public Pension Fossil Fuel Divestment

California Assemblyman Kills Fossil Fuel Divestment Bill

By Nick Cunningham - DeSmog, June 28, 2022

The California legislature was close to passing a bill that would require the state’s two massive pension funds to divest from fossil fuels, but on June 21 the legislation was killed by one Democratic assemblyman who has accepted tens of thousands of dollars in campaign contributions from the energy industry.

Senate Bill 1173 would have required the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), the two largest public pension funds in the country, to divest from fossil fuels. CalPERS and CalSTRS, which manage pensions for state employees and teachers, together hold more than $9 billion in fossil fuel investments.

The global divestment movement now claims that more than 1,500 institutions have divested from fossil fuels, representing more than $40 trillion in value. New York and Maine have also committed to phasing out fossil fuel investments from their public pensions.

But because of the size of the two California pension funds, their divestment from fossil fuels would be a significant achievement for the global movement. The call comes as the state continues to suffer from long-term drought and catastrophic wildfires that are worsening with climate change. Activists say that the state cannot claim to be a leader on climate action while maintaining billions of dollars’ worth of investments in the fossil fuel industry.

Senate Bill 1173 would have required the pension funds to divest by 2027, and the legislation had the support of the California Faculty Association, the California Federation of Teachers, associations representing higher education faculty, and roughly 150 environmental and activist organizations. 

However, the American Legislative Exchange Council (ALEC), a corporate-backed front group with ties to the oil industry, opposed the bill, warning that divesting from fossil fuels would put public sector pensions in financial jeopardy.

The bill already passed the state senate, and still needed to pass in the state assembly, where Democrats command a large majority. But the bill needed to move through the Committee on Public Employment and Retirement, where Democrat Jim Cooper (Sacramento) is Chairman. 

On June 21, Cooper decided to let the bill die in committee, refusing to even bring it up for a hearing. Environmental groups denounced the “one-man veto.” Cooper has accepted more than $36,000 from the oil industry and other polluters over the past two years, including donations from Chevron and ExxonMobil, according to data compiled by Sierra Club, which called him a “Democratic favorite of the oil and gas industry.” 

“Jim Cooper just decided to continue investing public money in the unequal suffering of my community,” said Lizbeth Ibarra, an activist with Youth vs. Apocalypse, a California-based climate justice organization.

'Moral Failure': California Dem Pulls Plug on Fossil Fuel Divestment Legislation

By Brett Wilkins - Common Dreams, June 21, 2022

"This defeat is just a temporary setback," said one campaigner. "We will organize to come back stronger to make our demand for fossil fuel divestment heard because fossil fuel companies are driving us toward unimaginable disaster."

Climate, environmental, and social justice advocates on Tuesday condemned the decision by a Democratic California lawmaker to kill proposed legislation that would require two of the state's leading pension funds to divest from the fossil fuel industry. 

"Today amidst a historic mega-drought, wildfires, and fossil-fueled public health crises, Assemblymember Jim Cooper, Chair of the Assembly Committee on Public Employment and Retirement, refused to allow Senate Bill 1173, California's Fossil Fuel Divestment Act, to be heard in his committee," Fossil Free California said in a statement. "This one-man veto allows the state's pensions to continue to invest billions from public funds into the fossil fuel industry, for now."

S.B. 1173 would have prohibited the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS)—the two largest public pension funds in the United States—from making or renewing investments in fossil fuel companies. The measure would also have required the pensions to liquidate their fossil fuel holdings by 2030. The two funds currently hold an estimated $9 billion in fossil fuel investments.

"This decision is a moral failure that disproportionately impacts young people, Indigenous communities, communities of color, and low-income communities," the coalition asserted. "Climate chaos has already cost California billions in damages and health costs from fossil fuel pollution and climate disasters. Jim Cooper, who has just been elected Sacramento County Sheriff, has reported $36,350 in Big Oil campaign contributions from this election season alone."

State Sen. Lena Gonzalez (D-33) said in a statement that "while I am deeply disappointed that my Senate Bill 1173 was not set for a hearing in the Assembly Committee on Public Employment and Retirement this week, I remain committed to the necessary and ongoing fight against the impacts of climate change on our state, and especially those communities in my district that are disproportionately impacted by the negative effects of the climate crisis."

"Teachers and state employees whose retirement futures are invested by our state's pension funds have long demanded that CalPERS and CalSTRS cease investing their money in fossil fuel companies, and this demand will only grow stronger and louder," she continued.

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