CalPERS pension fund should divest fossil fuel holdings
Responding to climate change, more than 1,600 universities, pension funds and governments have divested over $40.6 trillion of their fossil fuel assets to date. Their financial returns are as good or better than before.
Yet the California Public Employees' Retirement System, the largest U.S. pension fund, continues to insist that engagement, rather than divestment, is the most effective way to address climate change. Divestment is “a very inelegant solution,” said Peter Cashion, head of CalPERS sustainable investment, in unveiling in November the retirement system's new 2030 Sustainable Investment Plan.
So how effective and “elegant” has engagement been?
CalPERS' December 2019 “Addressing Climate Change Risk” report admitted that only 9% of companies it engages with 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 the “significant impacts of engagement” is the fact that Shell announced targets for reductions every three to five years toward a goal of shrinking its net carbon by about half by 2050 and agreed to include its emissions across its supply and demand chains. But one half of net carbon emission by 2050 is far too little, too late.
Worse, a Financial Times article revealed a disclaimer at the end of the announcement that
Shell will not change its strategy or capital deployment plans 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 an expected doubled demand by 2040.
The CalPERS report also lauded Chevron's announced reduction goals for greenhouse gas intensity in production. However, Chevron at the same time plans to double its production in the Permian Basin, in western Texas and southeastern New Mexico, and produce 1 million barrels of oil equivalent per day, so its overall emissions can only rise. In the same doublespeak, Exxon Mobil promised reductions of flaring and methane emissions while planning to triple production in the Permian Basin.
CalPERS claimed success in the shareholder vote for three new “climate friendly” Exxon board members in May 2021, yet the company since then has made no changes in climate-related policy and has announced expanded greenfield drilling in Guyana.
This is the big picture of engagement: Companies announce misleading targets of reduced carbon intensity in production rather than overall greenhouse gas reduction or set goals of net zero by 2050 without concrete interim steps. The companies then tout these resolutions to maintain the support of their investors while actually making huge investments in hydrocarbon expansion in expectation of increased demand (and increased profits) through at least 2040.
The research group Carbon Tracker noted that despite net-zero commitments, “no major oil company has actually stopped new drilling or other capital expenditures.”
In December 2022 the House Oversight Committee, released a damning report demonstrating that major fossil fuel companies such as Chevron, Exxon, BP and Shell have no intention of moving away from oil and gas production but are instead using false “net-zero” commitments to mislead the public, while doubling down on expansion and production. The committee published an internal memo of the American Petroleum
Institute written by the CEO, Mike Summers, that says it all: publicizing the industry's efforts to reduce emissions from natural gas production presents “an opportunity to further secure the industry's license to operate.”
Despite CalPERS' opposition to divestment, the new 2030 Plan does allow for an “exit” from securities that don't have credible net-zero plans; however, it fails to specify how or when that determination will be made. All the evidence shows that no net-zero plans are credible, and the time to divest is now.