divestment

By Adam Scott and Patrick DeRochie - Shift Network, May 5, 2022

New analysis finds 80 Canadian pension managers with 124 different roles at 76 fossil fuel companies, raising questions from beneficiaries about fiduciary duty and pension administrators’ potential conflicts of interest on climate-related investment decisions. 

Shift Action for Pension Wealth and Planet Health’s May 2022 report, Canada’s Climate-Conflicted Pension Managers: The Oil and Gas Insiders Overseeing Canadians’ Retirement Savings, reveals the deep entanglement between the fossil fuel industry and directors, trustees and investment managers at Canada’s largest public pension funds. 

The overlap raises serious questions from beneficiaries about their pension administrators’ ability to objectively manage climate-related financial risks and make critical climate-related investment decisions – when the pension administrators are so deeply entangled with an industry whose products are the primary cause of the climate crisis, whose bottom line depends on the continued production of climate-damaging products, and that has a long and ongoing legacy of obstructing efforts to cut carbon pollution.

The analysis finds that among Canada’s ten largest pension funds, which together manage more than $2 trillion in assets:

• 80 different pension directors, trustees, executives and senior staff currently hold or previously held 124 different roles with 76 different fossil fuel companies. 

• This includes nine current pension fund directors or trustees that currently hold 13 roles on the board of directors of 12 different fossil fuel companies, and 56 senior staff or investment managers at pension funds who hold 76 different corporate director roles at 39 different fossil fuel companies. 

• Seven of the ten pension funds have at least one board member who simultaneously sits on the board of a fossil fuel company. 

• In some cases, over a quarter of the pension fund’s board has direct connections to the oil and gas industry.

The best long-term interests of pension fund beneficiaries are not aligned with the financial interests of shareholders of fossil fuel companies. A pension director who is also a corporate director of a fossil fuel company could find themself with real or perceived conflicts of interest between their fiduciary duty to invest in the best long-term interests of pension beneficiaries, and their simultaneous legal obligation to act in the financial interests of the fossil fuel company on whose board they sit.

Press Release

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Resolution Urging Support of SB 1173 (Gonzalez) Fossil Fuel Divestment Act
Adopted by the ILWU NCDC – March 26, 2022

WHEREAS, climate change, through rising sea levels, drought, heat waves, and increased wildfires is already negatively affecting human wellbeing, ecosystems and biodiversity; and 

WHEREAS, climate change is an issue of environmental justice, disproportionately impacting Indigenous communities, communities of color, and low income communities due to historical oppression, inequity of power, and lack of access to resources for prevention and relief; and

WHEREAS, the World Economic Forum recognizes the climate crisis as “a child-rights crisis” and says “the adverse weather events caused by a warming planet affect children first and worst”; and

WHEREAS, an analysis from the Harvard T.H. Chan School of Public Health indicates that the effects of heat, wildfires, storms, floods, and droughts can negatively affect both the physical and mental health of children. The negative effects on children’s physical health from the burning of fossil fuels and climate change include impacts on allergies, asthma, brain development, low birth weight, and preterm birth; and

WHEREAS, the American Academy of Pediatrics recognizes that the physical and mental impacts of climate change “not only directly threaten the lives and safety of children, they put them at risk of mental health problems—and can also cause lasting effects when they destroy their communities and their schools”; and

WHEREAS, a review of the psychological effects of climate change on children finds that “effects of climate change place children at risk of mental health consequences including PTSD, depression, anxiety, phobias, sleep disorders, attachment disorders, and substance abuse. These in turn can lead to problems with emotion regulation, cognition, learning, behavior, language development, and academic performance”; and 

WHEREAS, independent studies by financial consulting firms Blackrock and Meketa found divestment reduces risk, and improves, not weakens, investment returns; and

WHEREAS, a Corporate Knights study found if CalPERS and CalSTRS had divested in 2010 they would have gained $11.9 and $5.5 billion respectively by 2019; and 

WHEREAS, the International Panel on Climate Change concluded in 2018 that we have 12 years to make dramatic cuts in the use of fossil fuels (coal, oil, gas and tar sands) if we are to keep warming to 1.5o C and avoid more catastrophic change; and

WHEREAS, the fossil fuel industry is the single most powerful obstacle to addressing climate change, using their immense lobbying power in Washington D.C. and Sacramento to block climate legislation; and 

WHEREAS, fossil fuel companies' own scientists knew their products were causing climate change, but the companies kept it secret; and 

WHEREAS, to effectively address climate change, most fossil fuel reserves must remain in the ground, never to be used. This makes fossil fuel stocks a risky investment; and

WHEREAS, divestment in specific segments or business operations by CalPERS and CalSTRS is already standard practice and is specifically allowed by the California Constitution; and

WHEREAS, divestment means selling directly held or commingled assets including fossil fuel public equities and corporate bonds; and

WHEREAS, the California Climate Jobs Plan provides a comprehensive roadmap for decarbonization and just transition from a fossil fuel based economy; and

WHEREAS, The ILWU Northern California District Council has endorsed the California Climate Jobs Plan (in February 2022);

THEREFORE LET IT BE RESOLVED, that the ILWU NCDC strongly supports SB 1173 (Gonzalez) the fossil fuel divestment act. And upon passage, a copy of this resolution will be sent to Senator Lena Gonzalez’s office requesting that the ILWU NCDC be listed as an official supporter of the bill.

By Nick Cunningham - DeSmog, March 14, 2022

A coalition of healthcare professionals and climate finance organizations are calling on hospitals to divest their pension and retirement funds from fossil fuels, citing the severe public health hazards from climate change. 

“The research on the severe, ubiquitous and accelerating consequences to public health from climate change is unequivocal,” Dr. Ashley McClure, a primary care physician and co-Executive Director of the California-based nonprofit Climate Health Now, said in a statement. “Just as many leading health organizations have divested from tobacco companies given the unacceptable health harms of their products, our institutions must now invest in alignment with public health and collective safety by urgently divesting our resources from the coal, oil, and gas corporations fueling the climate crisis.”

Around the world, more than 1,500 institutions have announced divestments from fossil fuels with commitments that total more than $40 trillion, according to a database maintained by climate advocacy groups 350.org and Stand.earth. The pledges come from governments, philanthropies, universities, faith-based organizations, and pension funds. 

But activists are pressing on a new front, demanding that hospitals and healthcare institutions sever their financial ties with fossil fuels. Named “First, Do No Harm,” the coalition of healthcare professionals and climate finance organizers is calling on medical institutions to exclude oil, gas, and coal from their pensions and retirement funds. They are also asking healthcare workers across the country to join in the effort and pressure their employers to take that step. 

“Our sector has to act on this. This is a healthcare issue. Climate policy is health policy. We can no longer ignore the voluminous research that can directly connect serious healthcare threats to fossil fuel air pollution, for example,” Don Lieber, a certified surgical technician at Memorial Sloan Kettering Cancer Center in New York, told DeSmog. 

Many hospitals do have plans to reduce their greenhouse gas emissions in their operations, but that only addresses part of the problem. “Hospital systems, including ours at Sloan Kettering have a fantastic sustainability program that focuses on these important operational reductions. We need that. But we cannot ignore the other half,” Lieber said, referring to the institutions’ investments in fossil fuels. 

By Jeremy Brecher - Labor Network for Sustainability, March 2022

Protecting the climate requires rapidly reducing the extraction of fossil fuels. That’s a crucial part of the Green New Deal. While the federal government has done little so far to reduce fossil fuel production, people and governments all over the country are taking steps on their own to cut down the extraction of coal, oil, and gas.

Introduction

The U.S. needs to cut around 60% of its greenhouse gas (GHG) emissions by 2030 to reach zero net emissions by 2050.[1] The world will need to decrease fossil fuel production by roughly 6% per year between 2022 and 2030 to reach the Paris goal of 1.5°C. Countries are instead planning and projecting an average annual increase of 2%, which by 2030 will result in more than double the production consistent with the 1.5°C limit.[2]

In the previous two commentaries in this series we have shown how initiatives from cities, states, and civil society organizations are expanding climate-safe energy production and reducing energy use through energy efficiency and conservation. These are essential aspects of reducing climate-destroying greenhouse gas emissions, but in themselves they will not halt the burning of fossil fuels. That requires action on the “supply side” – freezing new fossil fuel infrastructure and accelerating the closing of existing production facilities. That is often referred to as a “phaseout” or “managed decline” of fossil fuels.

Such a phaseout of fossil fuel production is necessary to meet the goals of the Green New Deal and President Joe Biden’s climate proposals. The original 2018 Green New Deal resolution submitted by Rep. Alexandria Ocasio-Cortez called for a national 10-year mobilization to achieve 100% of national power generation from renewable sources. Biden’s Build Back Better plan sought 100% carbon-free electricity by 2035 and net zero GHG emissions by 2050. These goals cannot be met without reducing the amount of fossil fuel that is actually extracted from the earth.[3]

While the US government and corporations are failing to effectively reduce the mining and drilling of fossil fuels, hundreds of efforts at a sub-national level are already cutting their extraction. 50 US cities are already powered entirely by clean and renewable sources of energy. 180 US cities are committed to 100% clean energy.[4] According to a report by the Indigenous Environmental Network and Oil Change International, Indigenous resistance has stopped or delayed greenhouse gas pollution equivalent to at least one-quarter of annual U.S. and Canadian emissions.[5] Such reductions are an essential part of a widespread but little-recognized movement we have dubbed the “Green New Deal from Below.”[6]

By staff - Climate Safe Pensions, December 2021

A first-of-its-kind report ... from Climate Safe Pensions Network and Stand.earth reveals that just 14 pension and permanent funds finance fossil fuels to the tune of $81.6 billion.The report shows a comprehensive accounting of the fossil fuel exposure of 14 pension funds in one report from Climate Safe Pensions Network and Stand.earth reveals that just 14 U.S. public pension funds are the quiet culprits of climate chaos: with $81.6 billion invested in coal, oil, and gas.

With over $46 trillion in assets worldwide, pension funds are among the largest institutional investors in fossil fuels. These investments have dangerously underperformed the rest of the market, making public pensions’ fossil fuels investments inherently risky.

Pension funds’ financial influence make them a force to reckon with in the battle to confront, slow and mitigate climate change. Pension fund decision-makers must take climate protection seriously — not only for their financial well-being, but also for the well-being of their millions members.

With 10 years of data, there’s hard evidence that divestment is a winning financial strategy. The fastest way for pensions to address climate change is to divest fossil fuel holdings and invest in just and equitable climate solutions.

Read the text (PDF).

By Carlos Davidson - Common Dreams, November 22, 2021

Shareholder engagement promotes the image of fossil fuel companies as good corporate citizens, and strengthens their political power to fight climate legislation.

What should pension funds, university endowments and other institutional investors do to help address climate change? The fossil fuel divestment movement calls on funds to divest from fossil fuel companies. Fund owners and managers often oppose divestment, preferring "shareholder engagement"--that is, owning fossil fuel company stocks and voting at shareholder meeting and urging companies to change. While shareholder engagement with fossil fuel corporations on climate change is well intentioned, I will argue that it harms rather than helps efforts to address climate change.

Shareholder engagement is detrimental to winning needed government climate action

The pace and magnitude of emissions reductions needed to respond to the climate crisis will not come from voluntary actions by companies, but only from strong government regulations, programs and public investments. Shareholder engagement is aimed solely at getting companies to change and does nothing to get needed government climate action. Tariq Fancy is BlackRock's former chief investment officer for sustainable investing. He writes in BlackRock hired me to make sustainable investing mainstream. Now I realize it's a deadly distraction from the climate-change threat that "Only governments have the wide-ranging powers, resources and responsibilities that need to be brought to bear on the problem." The perception that shareholder engagement is moving companies to address climate change weakens public support for the need for government action. Fancy calls sustainable investing a "deadly distraction" and argues that it is "harming the world by creating a societal placebo that delayed overdue government reforms."

More importantly, shareholder engagement promotes the image of fossil fuel companies as good corporate citizens, and strengthens their political power to fight climate legislation. This is exactly opposite the strategy of divestment, which aims to weaken the political power of fossil fuel companies by calling them out as bad actors, and thereby win climate legislation. Former SEC commissioner Bevis Longstreth in Climate Change and Investment in Fossil Fuel Companies: The Strategy of Engagement Won't Work explains it this way:

"Indeed, engagement is likely to assist Big Oil and Big Coal in postponing the day when governments limit the burning of fossil fuels. The International Energy Agency reckons that, if governments act to compel adherence to the carbon budget, necessary to have a chance of holding the planet to only a 3.6 F rise in temperature from pre-industrial levels, it will cause Big Oil and Big Coal to lose about $1 trillion a year. Engagement with institutional investors like Harvard gives the fossil fuel giants the protective cover they need to stretch out the transition process to renewables for as long as they can. It legitimizes talk over action."

By Tom Fraser - Jacobin, October 19, 2021

One of Canada’s largest institutional investors, responsible for managing billions of dollars in workers’ pensions, has committed to fossil fuel divestment. It’s a good step — but without pressure from the labor movement, these promises will mean nothing.

On September 28, the institutional investor and pension manager Caisse de Dépôt et Placement du Québec (CDPQ) announced that it would no longer invest in oil production. The Caisse made this decision as part of their strategy to reach net-zero by 2050. Canada’s second-largest pension fund manages the retirement contributions of over six million Quebecois. Their stability and security in old age is bound up with the Caisse’s ability to assure returns on its vast asset portfolio.

Although it comes with caveats, the Caisse’s announcement could potentially be the start of a wider movement on the part of investment companies to divest Canada’s public sector pension funds from fossil fuels. With such massive portfolios, pensions could be at the forefront of a just transition.

By Peter Menchini - Maya Media, September 25, 2021

Youth vs Apocalypse: #UPROOTtheSYSTEM - 4K from Peter Menchini – Maya Media on Vimeo.

By Sandy Emerson - Unison, September 24, 2021

CalPERS has finally divested from three more thermal coal companies, as required by law. Following the passage of SB 185 (2015) CalPERS divested from all but three (out of 17) selected thermal coal mining companies: Exxaro, Adaro, and Banpu.  In an email to Fossil Free California, CalPERS’ Managing Investment Director Anne Simpson said that CalPERS no longer owns those companies: “As per the earlier board discussion, the three companies were retained for further engagement, which did not make progress hence the sale.”

The divestment from the remaining three thermal coal companies from the 2017 list shows the power of stakeholder pressure. CalPERS re-started engagements with Exxaro, Adaro, and Banpu in October, 2020, after Fossil Free California published its hard-hitting report “CalPERS Continues to Invest in Coal”. At the March 15, 2021 Investment Committee Meeting, Anne Simpson stated that the companies’ responses were being reviewed and that a decision would be announced toward the end of 2021.

We celebrate the fact that FFCA’s letter-writing campaign generated 626 individual letters to CalPERS, after we sent a series of detailed letters to CalPERS executive and investment staff and published the report. This long-awaited divestment success is thanks to the persistence and commitment of pension members, beneficiaries, and concerned Californians who sent letters, made public comments, and generally kept the pressure on for CalPERS to complete its mandated divestment.

By Marcy Winograd - Common Dreams, September 7, 2021

As the climate crisis sent thousands fleeing wildfires in Northern California, CalSTRS, the nation's second largest public pension fund, postponed full divestment from fossil fuels for nearly 30 years.

Over objections from CTADivest, organizers within the powerhouse California Teachers Association, the retirement fund's investment committee voted unanimously September 1, 2021,to support a staff recommendation to adopt a net-zero Greenhouse Gas Emissions (GHG) portfolio by 2050 or sooner. This translates into continued "engagement" or investment in Big Oil until the date the Paris Agreement set for countries to reach net-zero carbon emissions.

What is net-zero anyway? It's the point at which GHG's released by humans are "counterbalanced," in CalSTRS' words, by removing GHG's from the atmosphere, though no one is clear on how to remove these earth-warming gases through carbon capture and storage (CCS) or if it's even possible to inject them back into the ground without burning more fuels, poisoning drinking water or triggering earthquakes.

The CalSTRS vote came two months ahead of the next UN climate conference in Scotland, where the COP26 Coalition, made up of 350.org, CODEPNK and others, is expected to turn out thousands of protesters to demand the world's nations run, not walk, toward divestment from fossil fuels, as well as militarism, a key driver of the climate crisis.

The CalSTRS Board vote to continue investing in fossil fuels also came days after the California Democratic Party reaffirmed a 2015 resolution calling on the state's pension funds to divest from fossil fuels.