pension funds

By Thomas Hanna, Johanna Bozuwa, and Raj Rao - The Climate and Community Project, April 2022

Publicly and cooperatively owned electric utilities (community utilities) have the potential to demonstrate what an equitable, clean energy system looks like in the United States. They could become powerful “anchor institutions” in their community by grounding their decisions in democratic governance and community partnership, affordable energy and community wealth building, and access to renewable energy.

The United States urgently needs to transition off of fossil fuels and onto clean sources of energy (especially renewable energy) to maintain a livable climate. As of 2020, only around 20% of US electricity generation is from renewable energy sources. Energy utilities – the companies that run our power systems – have enormous control over the scope and scale of the transition, but have often dragged their feet or even fought against clean energy. Not only does their inaction imperil the very future of humanity, but it directly harms families – often Black, Indigenous, low income, or otherwise marginalized – who live in the shadow of toxic power plants. The current US energy system is dirty and expensive. 31% of households in the country have to make the choice between buying groceries or paying their energy bills. In response, communities across the country are beginning to mobilize to demand an energy transition.

We have a powerful tool to accelerate the energy transition in a way that builds community wealth and energy justice in our communities: publicly and cooperatively- owned energy utilities. In this report, we refer to these types of utilities as “community utilities” because they are owned by the local community. Around thirty percent of households in the United States get their energy from community utilities. This is no small part of our energy system. As non-profit utilities without faraway shareholders that are ultimately accountable to the local community, these utilities have the potential to be an example for what an equitable, clean, and democratic energy system could look like. Collective action and organizing to push community utilities toward the intersections of clean/ renewable energy and community development can be more tractable than in corporate utility areas because community utilities’ mandate is to provide a public good, not to maximize profits for shareholders.

Community utilities and cooperatives have a radical history. In the early days of electrification one hundred years ago, residents across the country rose up against profiteering private utilities who provided poor (or nonexistent) service at high prices by creating their own publicly and cooperatively owned utilities. In the state of Nebraska, for instance, they kicked all private utilities out of the state for good. To this day, there are no private utilities providing electricity to Nebraskan homes. This cause was, in turn, taken up by national leaders. For instance, Franklin D. Roosevelt started the Rural Electrification Administration (REA) after rural communities pushed for access to light in their regions. Before that, corporate actors didn’t want to enter rural areas because they didn’t see how they could profit from such unpopulated land. The REA program took electrification from ten to ninety percent in ten years as groups of farmers banded together to start their own electric cooperatives, run on cooperative principles. However, today some community utilities have forgotten their past and are not living up to their potential. Many still rely on fossil fuel energy and some have even pushed back against important climate resiliency approaches like rooftop solar. In some places, democratic governance structures have deteriorated (or been manipulated by powerful interests) and residents don’t even know that they actually own their utility. It is time to reignite the radical history of community utilities to herald the transition to a genuinely democratic, equitable, and clean energy system.

Download a copy of this publication here (PDF).

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 Julia Rock - Jacobin, November 15, 2021

In early October, an oil pipeline owned by Amplify Energy spilled into the ocean in Southern California. Roughly 25,000 gallons of crude oil leaked into the ocean off the coast of Orange County, according to the US Coast Guard, prompting local, state, and federal criminal investigations. The pipeline may have been damaged by a ship dragging its anchor in January.

Complicating matters is that Amplify, the product of a merger and vulture capital restructuring of another bankrupt oil company, may not have enough cash to pay for cleanup or decommission the pipeline. That means taxpayers could end up bearing the costs.

This ecological and financial nightmare was in part funded by the retirement savings of schoolteachers in Pennsylvania.

That’s because the largest shareholder in Amplify is a hedge fund called Avenue Capital Group. The hedge fund is led by Milwaukee Bucks owner Marc Lasry, the short-lived chair of the scandal-plagued media company Ozy and the father of Wisconsin Democratic Senate candidate Alex Lasry.

According to an Avenue spokesperson, one of the firm’s funds invested in the debt of an oil company in 2015 that would later merge with Amplify. Avenue currently holds a 6.7 percent ownership stake in Amplify, making it the company’s largest shareholder and giving the firm a seat on Amplify’s board.

That fund is financed with money from public employees’ retirement funds — spotlighting how millions of workers’ savings are now being used to prop up the fossil fuel industry amid the climate crisis.

By Elizabeth Perry - Work and Climate Change Report, November 11, 2021

 “Canadian pensions are retiring fossil fuel investments” (Corporate Knights magazine, November 9) strikes a hopeful note about the state of Canada’s pension funds, stating: “Canadian pension portfolio exposures to fossil fuel stocks are down to a 10th of what they were 10 years ago, notwithstanding some controversial private equity investments.” The article summarizes analysis from the Canadian Pensions Dashboard for Responsible Investing, a new project of The Natural Step Canada, Smart Prosperity Institute, and Corporate Knights. That full report is a unique overview of sustainability performance, and employs measures such carbon footprint of the portfolio, presence of net-zero targets, the pay link to Environmental Standards (ESG), support for shareholder environmental resolutions, and more.

Another related Corporate Knights article describes youth-driven campaigns which have challenged pension plans to acknowledge and adjust to climate risk. “How young people are using climate litigation to fight for their future” focuses on youth activism targeting pension funds. It describes a years-long challenge to the Retail Employees Superannuation Trust (REST) in Australia, which ultimately ended in the pension fund settling a lawsuit out of court by acknowledging that “climate change is a material, direct and current financial risk” that could “lead to catastrophic economic and social consequences.” The fund also agreed to be more proactive and “ensure that investment managers take active steps to consider, measure and manage financial risks posed by climate change and other relevant ESG risks.” A second example describes the current activist campaign calling for the Ontario Teachers’ Pension Plan (OTPP) to phase out all current fossil fuel investments by 2025 and completely decarbonize its portfolio by 2030. Retired teachers and high school students have mobilized in Toronto, under the leadership of Shift Action for Pension Wealth and Planet Health (Shift), which is organizing similar campaigns at the ten largest Canadian pension funds. In September 2021, the Ontario Teachers Pension Plan Board announced  “industry-leading targets to reduce portfolio carbon emissions intensity by 45% by 2025 and two-thirds (67%) by 2030, compared to its 2019 baseline. These emission reduction targets cover all the Fund’s real assets, private natural resources, equity and corporate credit holdings across public and private markets, including external managers.” The WCR has more detail here .

Relevant to all pension management: new research published in Nature Energy and summarized in The Guardian with this headline: “Half world’s fossil fuel assets could become worthless by 2036 in net zero transition” .

By Elizabeth Perry - Work and Climate Change Report, October 26, 2021

In the run-up to COP26, and on the same day that Canada’s Big Six Banks joined the United Nations Net-Zero Banking Alliance (NZBA), Canadian institutional investors and some of its pension fund managers also hit the news, by releasing a new Canadian Investor Statement on Climate Change. Coordinated by the Responsible Investment Association (RIA), the statement signed on October 25 states: “We recognize that a transition to a net-zero economy will involve a major transformation of sectors and industries. We encourage all companies and stakeholders to facilitate a just transition that does not leave workers or communities behind. We also recognize that the financing required for transition activities and climate solutions presents an investment opportunity….. We further recognize that Indigenous Peoples have managed collective wealth for millennia – including lands, waters, and …..We support a transition to a net-zero economy informed by Indigenous perspectives, that supports Indigenous economic opportunities, and encourages business practices that align with the principles of the United Nations Declaration on the Rights of Indigenous Peoples (UNDRIP).”

The Statement sets out specific expectations for investees which include just transition, and pledges five actions for the investment community, such as integrating climate-related risks and opportunities into the investment processes and developing a climate action plan to achieve net-zero by 2050. Further, the 36 signatories pledge to “ Ensure that any climate-related policy advocacy we undertake supports a just transition and the ambition of achieving global net-zero emissions by 2050 or sooner, and engage with our industry associations to encourage climate advocacy efforts that are consistent with these goals.”

Pension funds which have signed on to the Statement (so far) include: British Columbia Investment Management Corporation, British Columbia Municipal Pension Board of Trustees, British Columbia Public Service Pension Board of Trustees, Canada Post Corporation Pension Plan, Caisse de dépôt et placement du Québec, Ontario Pension Board, Pension Plan of The United Church of Canada, University of Toronto Asset Management (UTAM), and the University Pension Plan.

 “Only Labor Can Force Canadian Pension Funds to Divest From Oil “ (Jacobin, October 19) puts this lofty new institutional Statement in perspective, as it takes a more critical look at one of the leading pension fund managers, the Caisse de dépôt et placement du Québec, and its September announcement that it would quit all oil production investments at the end of 2022. After also highlighting examples of the fossil and mineral exploration investments of some of Canada’s major pension funds, the article concludes: “ ‘Financial sustainability’ — despite the Caisse’s announcement — will continue to take precedence over climate justice.” 

Thus, the main point of the Jacobin article is to urge unions to take action:

 “….the unions who represent the beneficiaries of these pension funds can fight to make sure that the deferred wages of workers are used for the common good. In many cases, unions appoint trustees to boards of investment funds. If the labor movement chose to organize around these issues, it would be a game changer. …. Public sector funds are subject to legislation and can be reformed through political action. Although they’ve been carefully designed to be free of democratic accountability, they are not immune to external pressure. Sustained organizing by unions and their members can lead to greater amounts of worker control over the use to which these large sums of money are put.”

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.