Hard Questions for CalPERS’ Anne Simpson

Managing Investment Director Anne Simpson

Fossil Free California has some hard questions for Anne Simpson, who is the Managing Investment Director for Board Governance & Sustainability at CalPERS. She has helped create and perpetuate a culture of predatory delay, in which the strategy of shareholder engagement is not bolstered by credible actions to decarbonize the portfolio.

Instead, CalPERS pledges “net-zero by 2050” without setting enforceable near-term milestones, hoping for offsets and carbon capture to save the day. The Transition Pathway Initiative reports that only 15% of the oil and gas companies with which CalPERS engages have even set a target of “below 2 degrees” and not one out of all of these companies is on track to meet this goal by 2050 or sooner.

At the June 16 CalPERS meeting, Anne Simpson presented CalPERS’ 2016-21 Sustainable Investment Five Year Strategic Plan.  We have three concerns:

  • Lack of specificity – this moment calls for metrics, milestones, and science-based targets;
  • Relying on a single strategy – shareholder engagement –  to transform the portfolio, rather than reinforcing this approach by adding divestment and reinvestment;
  • No demand for a complete cessation of new fossil fuel extraction, which must occur as soon as possible, according to the recent IPCC and IEA reports.

CalPERS’ assets under management total more than $750 billion: well over $30 billion of that is invested in fossil fuels.  CalPERS has made a “net zero by 2050” pledge, but 2050 is too late and the “engagement” approach seems both vague and insufficient.

Questions:

  • How will CalPERS Sustainable Investment staff verify that companies have “established a carbon reduction target consistent with Paris COP 21”? 
  • By what deadline must companies establish their carbon reduction target? 
  • What will be the consequences for companies that fail to establish the required carbon reduction target?
  • With what frequency will companies be required to “measure and report reduction in carbon footprint”? 
  • What will be the consequences for companies that fail to “measure and report reduction in carbon footprint” and/or fail to meet reporting timelines?
  • What methods will staff use to determine the accuracy of companies’ measured/reported carbon footprint reduction? 
  • What methods will staff use to “track financial performance of companies with established reduction targets”?

Our second concern regards the narrow strategic approach to carbon emissions reduction being undertaken by CalPERS.  The “Climate Change” Section states that CalPERS’ objective is to: “Manage climate risk and opportunity through corporate engagement”. Recent research by BlackRock and Meketa shows a growing number of public pension funds are reducing portfolio climate risk exposure while earning equal or better financial returns by utilizing a combination of three strategies: (1) corporate engagement; (2) divestment from fossil fuel majors that refuse to reduce their greenhouse gas emissions; and (3) expanded investment in energy efficiency/zero carbon technology sectors. 

Why, unlike a growing number of its pension fund peers, is CalPERS not pursuing this three-pronged approach to “manage climate risk and opportunity”?

Read the full text of the letter