Opinion: CalPERS’ Ambition is Too Low; Climate Action Too Slow

Managing Investment Director Anne Simpson

In a recent interview with the Washington Post, CalPERS Managing Investment Director Anne Simpson traced the origins of the term “fiduciary” back to the Christian Crusades.  Indeed, that history might explain why CalPERS remains invested in fossil fuels with an almost religious zeal.  

As with the Crusades, CalPERS’ quest is wrapped in a mantle of sanctity. Through shareholder engagement and participation in large “net zero” alliances with asset owners and financial institutions, CalPERS seeks to convert fossil fuel companies and redeem them, just as Crusaders sought to convert the infidels.  With the much-vaunted support of some of the world’s largest investors, the Climate Action 100+ has crafted a complete, if misguided, narrative about how making “net zero” pledges will transform 160-odd climate-damaging profiteers into clean energy converts. The faith that Anne Simpson, Ceres, and their Climate Action 100+ allies have in their engagement approach is radiant, and unshakeable.

These devotees of shareholder engagement refuse to acknowledge the dirty truth that fossil fuel companies won’t change.  The likes of Exxon, Chevron, Shell, and ConocoPhillips have no credible plans to change their business practices in response to the climate crisis — and they can continue to deny, and delay, as long as CalPERS and other investors keep propping them up.

Delusion and Delay

CalPERS arrived at COP26 with a pledge of “net zero by 2050”, and has made a further pledge to reduce its portfolio emissions by 25-30% by 2025.  To meet the next goal, CalPERS has to persuade the fossil fuel companies it holds to reduce their Scope 1 and Scope 2 emissions, so that CalPERS can meet its own goal. The reductions in emissions could come from operational efficiencies that decrease the carbon intensity of business operations — by putting solar panels on pipeline pumping stations or by plugging methane leaks, for example.  But without the threat of divestment, how will the hand-wringing and hand-holding of shareholder engagement inspire companies to achieve even this modest goal?

The Climate Action 100+ target companies need to be motivated to deliver measurable, audited GHG emissions reduction results within strict deadlines, by understanding that the consequence of noncompliance is divestment.  Otherwise, CalPERS and the Climate Action 100+ are complicit in upholding the denial, deception, and delay caused by fossil fuel companies. 

For the long-term health of the portfolio, CalPERS must stop holding public employees’ retirement funds hostage to the fossil fuel industry. Recently, several large, well-respected institutions made the decision to divest from fossil fuels, including Quebec’s $317 billion Caisse and $565 billion Dutch pension giant ABP, Europe’s largest pension fund.  These asset owners have concluded that shareholder engagement is not sufficient to remove the risk that fossil fuels present to their portfolios.

Citing the necessity of supplying energy from destructive fossil fuels (as if there were no alternatives), Anne Simpson has said “We can’t just walk away”: but that’s exactly what’s required. Divest now.