divestment

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

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).

By Steve Keen - Carbon Tracker, July 2023

Pension funds are risking the retirement savings of millions of people by relying on economic research that ignores critical scientific evidence about the financial risks embedded within a warming climate.

This report reveals that many pension funds use investment models that predict global warming of 2 to 4.3°C will have only a minimal impact on member portfolios, relying on economists flawed estimates of damages from climate change, which predicts that even with 5 to 7°C of global warming, economic growth will continue. The report underscores that such economic studies cannot be reconciled with warnings from climate scientists that global warming on this scale would be “an existential threat to human civilisation.”

Loading the DICE against pension funds is a call to action for investment professionals to look at the compelling evidence we see in the climate science literature, and to implement investment strategies, particularly a rapid wind down of the fossil fuel system, based on a ‘no regrets’ precautionary approach. Behaving cautiously now and acting to avoid a 1.5°C increase (let alone the 4°C outcome featured in this report) will enable future generations to secure the prosperity and quality of life that comes from a healthy planet.

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).

By James Tapper - The Guardian, May 14, 2023

People investing their pensions in funds that claim green credentials are being warned they may actually be backing the world’s largest oil and gas companies.

Carbon Tracker Initiative said that asset managers have invested $376bn (£295bn) in oil and gas companies, despite publicly pledging to back efforts to limit global temperature rises to 1.5C. The environmental thinktank based in London and New York found that more than 160 funds with a green label held $4.6bn in 15 companies including ExxonMobil, Chevron and TotalEnergies.

It also found that 25 members of the Net Zero Asset Managers initiative had invested in those companies and some had increased their holdings in 2022. NZAM said its international initiative started two years ago and investors needed time to change their strategies.

The warning comes as the UK’s Financial Conduct Authority prepares to publish anti-greenwashing rules that are intended to clean up how investment funds are labelled.

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.” 

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.

By Ted Franklin - Common Dreams, April 4, 2023

As it hits its 10th year, the divestment movement claims many moral victories, yet fossil fuel companies keep booming and carbon keeps rising. Divestment fails to turn off the taps.

"After a decade of action, we are making a difference in the fight against climate change,"proclaims DivestInvest, the global divestment network. Dozens of leading climate organizations from 350.org to the World Council of Churches have enlisted as core partners or endorsers of DivestInvest.

According to DivestInvest's website, 1,585 institutions have publicly committed to "at least some form" of fossil fuel divestment, representing an enormous $39.2 trillion of assets under management.

"That's as if the two biggest economies in the world, the United States and China, combined, chose to divest from fossil fuels," the site goes on.

DivestInvest's 2021 glossy prospectus intimates that, thanks to divestment, the fossil fuel industry has begun to collapse. At the very least, oil and gas moguls should be trembling with fear that divestment activists will soon force them to close their spigots and relinquish their financial and political power.

If only this were true.

The balance sheets of the fossil fuel companies say otherwise. Instead of the industry tailspin portrayed in DivestInvest's report, the fossil fuel giants are awash in record profits. In 2021, The Hillreports, "the four largest oil and gas companies made over $75 billion in profits, returned billions to their shareholders through record dividends and share buybacks, and handed out millions in compensation to their chief executive officers."

By Clara P, et. al. - Tipping Point, March 9, 2023

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.