CalSTRS moves $2.5 billion into low-carbon fund

norcal art party 07On July 14, the California State Teachers’ Retirement System (CalSTRS) voted unanimously to move $2.5 billion in assets to a low-carbon index fund. This laudable decision is another indicator of CalSTRS’ focus on the financial consequences of climate change — complementing the board’s recent vote to divest from coal companies, in compliance with the mandates of SB 185,

This low-carbon shift is symbolically important — in the words of Investment Committee chair Harry M. Keiley, “a significant step in our journey” toward a low-carbon portfolio. But in the context of the fund’s total portfolio, it is a small step. The $2.5 billion investment in the MSCI Low Carbon Target Index fund is just 1.3 percent of CalSTRS’ $188.8 billion in assets, which still include large holdings of ExxonMobil, Chevron, and other fossil fuel companies.

In response to the Board’s decision, Fossil Free California members Darcy Sweeney, Janet Cox, and Deborah Silvey made public comments at the meeting in West Sacramento, expressing appreciation for the direction CalSTRS is taking, while also encouraging a more robust response to the climate crisis. Darcy said she was heartened, but would like to see direct divestment from fossil fuels:

… not because divestment in itself will have a significant effect on the financial health of giant oil companies, but because CalSTRS’ divestment from fossil fuel companies would help to reveal these companies for the social pariahs that they are, and thus help speed the movement away from the burning of fossil fuels and toward a green energy future.

Janet also praised the Board, but she pointedly inquired how the Board will evaluate this low-carbon investment and what the next steps will be, based on that experience. This action is just a beginning. Deborah agreed, saying:

I am pleased to see the step CalSTRS is taking…. But it is a very small step to take at a time when we face unprecedented risk: both the risk of climate disruption and the consequent financial risk to our future pensions. It is a step we might have cheered more vigorously twenty years ago, when there was still time to experiment.

Brett Fleishman, senior global analyst with 350.org, cautioned that CalSTRS must “not treat this action as a ‘specialty’ investment. Fossil fuel companies are risky long-term investment bets as well as reckless social actors — the perfect combination for divestment.”

Fossil Free California has organized public comments and demonstrations by teachers and fund beneficiaries for the last two years, continuing to urge CalSTRS, the second largest public pension fund in the country, to divest. We applaud the Board for this significant low-carbon investment, and we encourage them to pursue many more such steps along this journey, ensuring that we keep carbon in the ground, not in the atmosphere.

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