Malcolm Mayes cartoon in Edmonton Journal, Nov 2019
Shale Slaughter Continues; Wall Street turned off the tap on credit for drillers
New study shows fossil fuel investments drove $19 billion in losses for CA and CO pensions by 350.org, November 5, 2019
Nov. 5, 2019 – As the climate crisis worsens, and with Donald Trump formally withdraws the US from the Paris Climate Accord, a new study shows that three major state pension funds in California and Colorado (CalSTRS, CalPERS and PERA), collectively lost over $19 billion in retirement savings for teachers, state troopers and public workers by continuing to invest in fossil fuels.
The study performed by media and analysis firm Corporate Knights calls into question the rationale for investing in the risky oil, coal, and gas industries, whose stocks damage both the portfolios’ profits and the planet’s life support systems.
Members of California’s State Teachers’ Retirement System plan to attend that fund’s Investment Committee meeting on Wednesday, November 6, demanding answers about why the fund continues to lose money on fossil fuels.
The Report: Full Findings & Background
Corporate Knights retrieved the funds’ stock holdings, weights, and valuations for each of the past ten years, and then used public information to compare those actual investment returns with a similar, but fossil fuel-free version.
In this analysis, over ten years, California’s $238 billion state teachers retirement fund (CalSTRS) would have gained $5.5 billion without fossil fuels. The $380 billion public employees retirement fund (CalPERS) would have generated an additional $11.9 billion. Similarly, Colorado’s $45 billion state pension fund (PERA) would have generated an estimated additional $1.77 billion in value without fossil fuels.
The reports, which were commissioned and funded by non-profit coalitions calling on the Boards of CalSTRS, CalPERS, and PERA to divest from fossil fuels, also highlight that large fossil fuel companies pulled down overall performance – while technology, healthcare, retail and entertainment boosted performance.
The full reports and data files are available here.
A Losing Strategy for Retirement Savings — and the Planet
These findings help show that fossil fuel companies are no longer wise long-term investment choices, and everyday Americans are feeling the sting.
In California, CalSTRS serves over 900,000 members, mostly public school teachers. CalPERS, the nation’s largest public pension fund, serves more than 1.9 million members in its retirement system, including former educators, police officers, firefighters, municipal workers and state employees. In Colorado, PERA serves 600,000 current and former teachers, state troopers, snowplow drivers, corrections officers, and other public employees.
The ten years these funds were invested in fossil fuels translates to a loss of $5,572 per member for CalSTRS; a loss of $6,072 per member for CalPERS; and a loss of $2,900 per member for PERA.
Quotes
“We knew CalPERS’ fossil fuel investments did environmental damage to us all. It turns out the damage was fiscal too – CalPERS took an $11.9 billion portfolio hit by persisting in dead-end investments in fossil fuels,” said Wynne Furth, Former City Attorney, CalPERS Retiree
“This report confirms what we have been predicting for years, based on the testimony of financial experts like Bevis Longstreth, former commissioner to the SEC: CalSTRS would be billions of dollars ahead if it had divested years ago. We can only hope that the fund will now divest its fossil fuel holdings to avoid further and larger losses,” said Jane Vosburg, CalSTRS Retiree; FFCA, Divest CalSTRS Campaign Lead
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“Energy is the worst-performing sector of the S&P 500 over the past decade. Since 2007, the sector has generated bond-like returns with equity risk. Our clients at the SRI Wealth Management Group represent a growing segment of investors expressing concern with climate change. As a result of this concern, many are choosing to shift their investments away from fossil fuel companies and into renewable energy. The collective impact these investors are having on share price for companies across the industry and on the broader environment is significant,” said Thomas Van Dyck, Managing Director—Financial Advisor, RBC Wealth Management
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A New Investment Trend Offers Hope
Divestment from fossil fuels is a clear and emerging trend. In September of this year, more institutions like churches, universities, and private equity funds pledged to divest. The total of managed assets pledged to divestment has leapt from $52 billion in 2014 to more than $11.5 trillion today — a stunning 22,000 % increase.
Over 1,110 institutions have now committed to policies black-listing some combination of coal, oil and gas investments. These institutions include sovereign wealth funds, banks, global asset managers and insurance companies, cities, pension funds, health care organizations, universities, faith groups, foundations, and the entire country of Ireland.
In Denver, Mayor Michael Hancock announced this past spring that the city was divesting its $6 billion General Funds’ portfolio from fossil fuels. The University of California also recently announced divestment of its $83 billion pension and endowment funds, for “purely financial reasons.”
Remaining Questions
In light of the Corporate Knights study findings, key questions for these funds and fund managers remain:
Why would any fund manager continue to invest in fossil fuels?
Risky, harmful to our planet and shared future, and less profitable than many other investment opportunities, fossil fuel investments are a lose-lose choice. Why are these major funds still investing in them?
Who will protect public employees’ retirement in California and Colorado? Retirees and other members of CalPERS, CalSTRS, and Colorado’s PERA might ask: “Now that the fund managers know these fossil fuel investments are losing us money, what are they going to do about it?”
What role do the oil, gas and coal industries play? These studies are being released in the midst of the groundbreaking two week trial of New York v. ExxonMobil, which alleges the corporation defrauded shareholders by not reporting accurately on the impacts of climate change on its business.
The California and Colorado pension funds collectively hold over $1.2 billion in Exxon stock. Do these fund managers believe the underperformance of this sector was a result of fraudulent misrepresentation by industry? What responsibility does the industry have for these losses?
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