The California Public Employees Pension System (CalPERS) has long had sustainability plans, but this year’s new plan is being released with more fanfare than usual — probably to try to head off increasing pressure to divest from fossil fuels. The plan offers greater clean energy investments, but remains woefully inadequate for today’s climate crisis.
New investments in clean energy and climate solutions are fine, but investments in good things do not make up for investments in bad things. Imagine if, in the middle of the struggle to divest from companies operating in South African Apartheid, CalPERS said they were not going to divest, but would, instead, make new investments in companies operating in democracies. Those actions would not be seen as solutions.
CalPERS’ sustainability plan makes new clean energy investments, but keeps in place investments in fossil fuels.
Gov. Gavin Newsom recently said that, “for more than 50 years, Big Oil has been lying to us — covering up the fact that they’ve long known how dangerous the fossil fuels they produce are for our planet.”
Initially, it appeared that CalPERS’ new plan would involve strict sustainability criteria. However, Peter Cashion, CalPERS’ head of sustainable investing, said, “we really will just focus on what is the financial risk posed to us by a company that does not have a transition plan.” But CalPERS already uses financial risk to shape its investments. That’s basic investing.
The climate crisis requires urgent action. The United Nations Environmental Program just released a report indicating that fossil fuel production in 2030 is slated to be double what is compatible with 1.5 degrees warming. We need to act now. CalPERS should divest, rather than make unclear promises of net zero by 2050.
Divestment is a moral issue. CalPERS divested from companies doing business in Apartheid South Africa because profiting from racial oppression was wrong. They divested from tobacco companies because knowingly selling and promoting a product that causes cancer is immoral. There is a global fossil fuel divestment movement because fossil fuel companies are using their tremendous political power to block desperately needed climate legislation around the globe and right here in California.
Divestment is the start of a process of reducing the tremendous influence of the fossil fuel industry on our political system and thereby making it possible to win government action on climate change.
In press coverage of the sustainability plan, doing the right thing on climate change is often incorrectly posed as in conflict with sound financial decisions. But the UC system said it divested because, in their words, “hanging on to fossil fuel assets is a financial risk.” The City of New York hired two top financial consulting firms to study divestment. They both concluded that funds that have divested have seen modest increases in returns compared to funds that have not divested.
Divesting from fossil fuels is the right thing to do, and it is a smart financial move.
Carlos Davidson is a professor emeritus of environmental studies at San Francisco State University, a member of the California Faculty Association and a CalPERS pensioner.