By David G. Barry
California’s two largest public pension funds will not be under pressure to divest from their fossil fuel investments or Russia.
Bills that would have forced the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) to divest from more than $11.5 billion of fossil fuel investments by 2030 and from $1.4 billion in Russia have been shelved.
Assemblyman Jim Cooper (D-Elk Grove), who leads the Assembly Committee on Public Employment and Retirement, blocked both proposals from advancing past the committee.
Cooper, who was recently elected sheriff of Sacramento County, said in a statement that “our hardworking public employees and retirees’ financial future should not be used as a political football. At a time when there is so much financial uncertainty and people are struggling to make ends meet, now is not the time to consider political divestment proposals that hurt the financial security of California’s pension systems.”
Both CalPERS and CalSTRS had opposed the bills, believing that divestment hurts investment performance. Other state public pension fund officials had watched the proceedings in California closely, knowing that approval of such measures – especially on fossil fuels – could spur other states to take action. Maine last year became the first state to force its pension fund to divest from fossil fuels.
Megan White, a CalPERS’ spokesperson, told Markets Group that the plan does not comment about bills dying in committee.
However, after the fossil fuel divestment bill passed the senate, CalPERS issued a statement, saying that it “recognizes that climate change poses a material risk to society, the global economy, and CalPERS’ investments. CalPERS has a strong commitment to the reduction of fossil fuel emissions. However, as a global investor with a fiduciary duty to its members and employer partners, CalPERS does not believe that divestment is an effective solution to this problem.”
The CalPERS board in April voted to “oppose” both that bill as well as the Russia bill, White said.
As for Russia, CalPERS in another statement said that since February, it has ceased all transactions in Russian publicly traded equity and stopped making new investments in the country. It also said it is reviewing its investments in the country to determine a path forward.
CalSTRS in May also issued a statement in which the chair of its board, Harry Kelly, said “our policy is unequivocal that we oppose bills that force divestment. We all want to get to the same place, to take powerful action to address climate change. We can do that and ensure a secure retirement for California’s hard-working teachers through our plan to leverage our relationships, coalitions and investments.”
Barbara Zumwalt, a CalSTRS information officer, told Markets Group that CalSTRS “believes climate change is one of the greatest threats to the future, with undeniable links to business and financial investments. The vast impacts of climate change threaten health and safety, our environment and the global economy, which put the CalSTRS investment portfolio at risk.”
But, she added that the pension plan “is focused on ensuring a secure retirement for California’s nearly 1 million working and retired public-school educators. Climate change is about more than fossil fuel companies; our entire investment portfolio is affected by climate risk. Divesting from fossil fuels ignores the larger climate change risks to the portfolio. CalSTRS’ approach is more holistic and includes measuring emissions, engaging directly with companies, working to expand government policies, and investing in solutions.”
State Sen. Lena A. Gonzalez (D-Long Beach), who introduced the fossil fuels divestment bill and saw it pass the Senate last month, said in a statement that she was “deeply disappointed” that the bill would not receive a committee hearing but remains “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 said she looks forward “to continuing this fight to ensure policy aligns with our state’s values as a world climate leader, and that we can pass on a livable planet to future generations.”