California’s Public Pensions Are Major Fossil Fuel Investors

(Bloomberg) -- California’s climate-conscious policies aren’t matched by the investment choices of its largest public pension funds, according to a report from two environmental groups. 

Of the 14 top U.S. pension funds analyzed by Stand.earth and Climate Safe Pensions Network, California Public Employees’ Retirement System, known as Calpers, and California State Teachers’ Retirement System, known as CalSTRS, were the largest investors in fossil fuel companies, with $27.1 billion and $15.7 billion, respectively, according to findings published Wednesday. 

The two combined hold about half the fossil fuel assets for the entire group, according to the study. Calpers also came first in fossil fuel holdings as a proportion of its total assets under management, at 6.9%.  

“It reveals to me that despite their rhetoric of being very active on climate issues, the proof is in their investment portfolio and what it looks like,” Richard Brooks, climate finance director at Stand.earth, said by email.  “It looks to me like they are amongst the biggest laggards.”

Calpers in a statement characterized its fossil-fuel investments as one way it can support the transition to net-zero emissions “through aggressive engagement.” The fund is a founding member of Climate Action 100+, which presses the world’s biggest greenhouse-gas emitters to take action. 

“We’ve already seen strong results to transition the largest U.S. utilities like Duke, AES and PPL away from coal and to renewables over the long term,” Anne Simpson, managing investment director at Calpers, said in the statement. “Divesting from these companies would mean selling our shares to other investors, leaving us still exposed to the risks of global warming from those emissions.”

CalSTRS is pledged to have a net zero portfolio by 2050 or sooner by reducing human-caused emissions and removing existing emissions by natural means, such as forests or through technology, including carbon capture, spokesman Thomas Lawrence said in an email. 

“CalSTRS agrees that climate change is a pressing issue, and we are aligned with the State of California in combating climate change and worked closely with the state’s Department of Finance in the development of the California Climate Investment Framework,” he said.  

California is a world leader in cutting carbon emissions. The state was second only to Hawaii to set the goal of generating 100% carbon-free electricity by 2045. The state has also pledged to phase out the sale of new gasoline-powered cars by the middle of the next decade and operates two carbon trading schemes, including its decade old low-carbon fuel standard, requiring oil refiners to buy credits from biofuel and other renewable fuel producers. 

The report looked at investments in fossil fuel producers, oil-field service providers, fossil fuel utilities and others. 

The New York State Teachers’ Retirement System had the second-largest share of its portfolio invested in fossil fuels, at 6.6%. 

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