Trump’s out, but CalPERS steps up on climate

CalPERS is a leader in forming a first-ever global alliance of large investors that would use its combined shareholder clout to engage companies with the most carbon emissions, believed by scientists to contribute to climate change.

The CalPERS board was told last week that its staff is working with others to complete the plan in time for an introduction at a United Nations investor meeting next month in Berlin, followed by a public launch in November at a UN climate change meeting in Bonn.

An inspiration for the alliance was a CalPERS discovery, following a UN Montreal agreement in 2014 to measure the carbon footprint of investments, that 80 companies among its 10,000 holdings were responsible for 50 percent of the carbon emissions.

Formal work began after a meeting last September of UN groups, large investors, and the Global Investor Coalition. The co-chairs were state Treasurer John Chiang, a CalPERS board member, and Scott Stringer of the New York City pension system.

“What we said was we would spend some time together working out whether we could identify what an engagement strategy would look like so that we could globally, as an alliance, ask for the same things of these companies and really bring our collective influence to bear,” Anne Simpson, CalPERS sustainable investments director, told the board.

The goal of the “Global Climate 100” initiative is to meet the Paris climate accord target of reducing carbon emissions by 80 percent by 2050, said a CalPERS presentation last April to Ceres, an advocate of business environmental action.

President Trump announced last June that the United States would withdraw from the Paris climate accord signed by 195 nations, calling it a “draconian” international deal that would impose unfair environmental standards on American businesses and workers.

“I was elected to represent the citizens of Pittsburgh, not Paris,” the president said.

In a statement responding to Trump, CalPERS said the Paris agreement “makes financial sense” and the goal of limiting global warming to 2 degrees or less has growing support among businesses and financial firms.

“The Paris Agreement enables us to manage material risk and build opportunity in our investment portfolio,” said Marcie Frost, CalPERS chief executive officer. “Supporting its goals ultimately benefits our members and their long-term retirement security.”

Most members of the new global alliance are assumed to have similar portfolios. The lead on engaging companies in a market would be taken by an investor familiar with the regulatory framework and language, possibly with a track record with the companies.

A plan to “ensure confidentiality” about the engagement has been worked out. A steering committee would have a staff member from each of the regional investor networks, and each region would nominate an investment owner or manager.

“CalPERS has volunteered to be the investor for the United States, which the others have agreed,” Simpson told the board.

She said organizing the alliance, “I think we are nearly there,” is being done with “some delicacy and care and courtesy” and with input and ideas from a number of organizations and regional investment networks.

If the plan is ready for the United Nations-supported Principles for Responsible Investment in Person meeting next month, she said, the alliance can issue a call for other investors to join the coalition, something never tried before.

“We have practiced by having a shared statement, which was very powerful in the runup to the Paris agreement,” Simpson said. “But to say, ‘Right, we will all roll up our sleeves and see with our common share holdings whether we can move these companies in a good long-term direction,’ that’s a piece of work. But anyway, I think we have made good progress.”

An investor global alliance on climate change might ease some of the pressure on the California Public Employees Retirement System to divest its holdings in major producers of carbon emissions.

RL Miller of Climate Hawks Vote reminded the CalPERS board last April that even though a Democratic Party resolution in 2015 urged CalPERS to divest fossil fuel, two of its largest holdings are in Exxon and Chevron.

Miller contended that a new policy adopted by CalPERS could be summed up as “no divestment ever.” State Controller Betty Yee, a CalPERS board member, said she thinks the policy encourages engagement but is not an outright ban on divestment.

Yee said CalPERS lacks the clout to make change on its own and does much engagement with other large investors. She said some work is not reported in documents that might reveal strategy.

“But understand, we are not letting up on this,” Yee told Miller. “We also see the risk, the huge risk that climate is going to place on this fund relative to the ability of companies to continue to create long-term value.”

Divestment makes a public statement, say critics, but it limits investment opportunity, decreases diversification, burdens staff, and may limit returns, increase risk, and result only in a turnover of shares with little or no effect on the target.

A policy of engagement, remaining a shareholder with a “seat at the table” to advocate change, is said to often be a less costly and more effective alternative to divestment and the sale of the stock.

Wilshire consultants estimated earlier this year that a half dozen CalPERS divestments, beginning with apartheid South Africa in 1986, have resulted in a total loss of $7.9 billion, including transaction costs and foregone investment returns.

The Wilshire report did not include a bill by Senate Pro Tem Kevin de Leon, D-Los Angeles, signed by Gov. Brown two years ago, that requires divestment, if fiduciarily responsible, of thermal coal companies not transitioning to clean energy.

A report earlier this month complying with the law said CalPERS had sold most of its coal holdings, taking a loss as coal stock rebounded under the Trump administration, the Sacramento Bee reported.

CalPERS, with investments worth $330 billion last week, was said to have stock in 24 coal companies worth $83 million two years ago as the coal industry appeared to be winding down.

A bill requiring CalPERS and CalSTRS to consider climate risk in fund management and to make annual reports of climate risk in their investment portfolios (SB 560 by Sen. Ben Allen, D-Santa Monica) stalled in the Senate appropriations committee in May.

The global investors alliance was discussed during a CalPERS board session on corporate governance that included diversity on corporate boards, executive pay, holding seats on multiple boards, and other issues.

The only public comment came from Jason Perez, president of the Corona Police Officers Association, who said he thought much of the discussion, though laudable, was contrary to the state constitution that says a retirement board’s first duty is to the beneficiaries.

“Please, please, I beg you, just make us money,” Perez told the CalPERS board. “Don’t try to change the world, right. Just make us money. I’m going to retire in 10 years, Lord willing, and live a long and happy life.”

Reporter Ed Mendel covered the Capitol in Sacramento for nearly three decades, most recently for the San Diego Union-Tribune. More stories are at Posted 21 Aug 17

8 Responses to “Trump’s out, but CalPERS steps up on climate”

  1. Rick Antonishek Says:

    I agree with Jason your first job is to make money for the retirees and future retirees. Stop this B.S and trying to change the world. Your Boss is no Jerry Brown but us the members of CalPers.

  2. randy Says:

    How about focusing on what’s best for our pensions not what’s best for environmentalists?

  3. Retired and smiling for now Says:

    Thats what happens in a 1 party liberal third world state. This mentality destroys everything it touches all in the name of feel good crap. After a 31 yr career in public safety in so kalif i have planned on losing a good part of my retirement at some point in time.
    Unions better wake up to this fact and get the libs/dems off this train. In the mean time the taxpayers keep voting these fools in, so maybe the ending they get, is the ending they deserve. Did i mention in the meantime how much more i have left to spend since i left that hell hole?

  4. SeeSaw Says:

    R & S : Anybody that served the citizens of CA for 31 years and thinks of those he served as inhabitants of a hell hole should certainly stay in his new paradise of choice. We certainly don’t need your kind in CA.

  5. thecoxclan Says:

    Hopelessly politicized retirement system … tinkered and toyed with by politicians that want to build their respective brands. This is a years old and operational status quo where the public employee does not come first. Already questionable oversight has metastasized into manipulation. Meanwhile, the promise of a decent CalPERS retirement – a pillar promise made to public employees over the years – is becoming a thing of the past. And the Democrats in power don’t seem to see that. Their green-lighting obscene employer rate increases proves it. More public agencies – once referred to as ‘barnacles on the CalPERS barge’ [in other words, unwanted] – are going to fold as a result. Agencies that CalPERS has no working knowledge of are going to collapse. LA Works and Loyalton are just the beginning. Believe it.

  6. CalPERSon Says:

    While I disagree with political divestment, this one is the right move even if it’s for the wrong reasons. As we’ve seen already in California, China and India, there’s been and will be tremendous growth in green energy. Over the long term the oil sector will gradually shrink and the investments will probably lose money, as we’ve seen with the coal sector.

  7. John Alvarez Says:

    The CalPERS board, like the politicians of this state, have lost their collective minds. To me, their attitude is, “It’s okay for cities go bankrupt and have people lose their pensions as long as we push our political agenda.” I also imagine phrases like, “The loss of your pension was for the greater good.” There are proper ways to legislate proactive environmental measures and it does not involved destroying cities and pensions. Instead, CalPERS needs to honor their fiduciary responsibility and just invest our money to make a profit. I hope cities band together and file a lawsuit to make CalPERS do their job PROPERLY or people vote out as many board members as possible. Our retirements are not their PAC funds for pushing their agendas or ideologies. Leave bad politics to our California politicians. If I still have a pension when I retire I’ll be spending it in a different state because California has gone over the edge of the common sense cliff.

  8. Dionysus Says:

    This is not OK. CalPERS takes part of a public employee’s paycheck every month during their working careers (it’s not voluntary) with the promise that they will have a stable financial future when they retire. It’s been reported for years how incompetent CalPERS leaders have made many bad actuarial and investment decisions that have put that promise of a stable financial future for public employees in danger. Some CalPERS leaders have been criminals and ended up in prison. Now CalPERS leaders are using public employee’s retirement money to play politics so they can advance their political careers. This is not OK.
    There’s a CalPERS Board election in September ( and those same CalPERS leaders are betting you will be lazy and not vote them out. Don’t play into their hands. VOTE OUT THE INCUMBERNTS and send the rest of them a message.

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