Updates on Climate-Safe Pensions

Thank you for your support in launching the Coalition for Climate-Safe Pensions on Climate Finance Day, April 23. In a week, we pulled together:

  • a blog announcing the the effort and underscoring the power of youth and elders uniting in common cause, 
  • a video highlighting the depth and breadth of this growing movement that aired during the national livestream last Thursday (you can see the full roundtable talk excerpted in the video here), and
  • a terrific panel that streamed live locally, also on April 23.  

A few things to consider for promoting divest + invest in the age of Covid:

  • Sustainable funds continue their track-record of outperformance before and during the crisis. See also Kathy Hipple from IEEFA’s excellent power point here.
  • The anti-divestment fig leaf behind which many big pensions hide is the promise of shareholder engagement with the FF industry. This year, the SEC was absolutely brutal in blocking major climate resolutions from the annual general meetings (AGMs) of the fossil majors. That means the tool big funds wield as an alternative to divestment isn’t even on the table. There are resolutions at Exxon and Chevron to create an “independent chair” — meaning the CEO would no longer be able to serve simultaneously as Board Chair — which many big “climate activist” funds are getting behind including NYSCRF and CalPERS. I have yet to see a compelling argument how this will help transition the industry in time, even if the resolutions win a (non-binding) majority vote and even if the companies comply with that non-binding vote. 
  • Arguably, the case for divestment at a moment when the oil markets are in turmoil is a little harder to make: “We can’t divest when the markets are down, we’ll wait until there’s another rally.” But the point to hammer on is that it can and will get worse, especially with respect to dividends that institutional investors are hooked on. Oil companies are under immense pressure to slash the dividend, at which point the investment case for staying in oil completely falls apart. There will never be a perfect time to divest, but waiting until the dividend disappears would be really dumb.
  • Hammer on leadership: As pension divestment pressure ratchets up around the country, YOUR pension has to lead the pack with a sensible divestment policy grounded in fiduciary duty and preserving pension value. 
  • Switch to fossil free passive funds now. I’m not sure what the breakdown between actively and passively managed equities is in your particular pension fund, but in California it’s ~ 30% active and 70% passive. That means the real leverage point is making sure the passive funds are clean. It’s a lot easier for a fund manager to switch to a fossil free fund, rather than asking fund providers to pull individual companies out of an existing fund. The climate finance community is pushing hard on major asset managers like BlackRock to offer fossil free passive funds as the default option to clients but they hide behind the argument that there isn’t client demand. We need to get the big asset owners like public pensions making this demand now.