Students and environmentalists pressure CalPERS, CalSTRS, UC to ditch big-oil investments
Activists hope the pension giants, university will reinvest in sustainable energy
Does your pension cause climate change? Demonstrators at last week’s Regents of the University of California meeting in Sacramento think so.
A movement is afoot to divest city pension funds and university endowments from fossil-fuel companies.
Organizers of the campaign, including local students and climate-change activists with 350.org, hope to tarnish the brands of oil, gas and coal companies. Ultimately, their goal is to move hundreds of billions of dollars from economic activities that cause climate change toward renewable, low-carbon investments.
California and Sacramento will be major battlegrounds.
Divestment activists are targeting California’s state pension systems, the California Public Employees’ Retirement System, or CalPERS, and the California State Teachers’ Retirement System, CalSTRS. Both have enormous holdings of fossil-fuel company stocks and bonds.
The University of California, which administers its own giant endowment and multiple pension funds, is also being pressed to ditch oil, gas and coal securities.
Last Thursday, students converged on the Regents governing board meeting at the Sacramento Convention Center.
“We’re hoping to convince the Regents to divest the UC system from the 200 largest publicly traded fossil-fuel companies,” said Ophir Bruck, a third-year UC Berkeley student who helped organize the action. “We’re not going to bankrupt these companies. It’s largely about hitting their reputation. …
“We want folks to associate their brand with the destruction of the Earth’s climate system.”
Sacramento-headquartered CalPERS manages the retirement investments for most of the Golden State’s city, county and state employees and has approximately $265 billion in assets under management. CalSTRS, also headquartered in Sacramento, has $164 billion invested.
Another group taking up the cause, California Teachers for Fossil Fuel Divestment, plans to press the CalPERS and CalSTRS boards to dump carbon-energy company securities.
“This will not be easy,” said Gary Waayers, a biology teacher from San Diego who founded California Teachers for Fossil Fuel Divestment. “Fossil fuels are a major part of the net worth of the planet, so divestment means divesting from a significant sector of the economy.”
CalPERS, the nation’s largest pension system, owns shares in at least 292 different companies involved in oil, gas and coal exploration, production, refining and transport. About 10 percent of the market value of CalPERS’ stock portfolio is fossil-fuel investments. The pension’s largest fossil-fuel stock picks are U.S. corporations Exxon Mobil Corp., Chevron Corp. and Schlumberger.
CalPERS also owns about $1.4 billion in oil, gas and coal company bonds. Through the bond market, CalPERS has financed the activities of companies like Nexen Inc., one of the largest exploiters of Canada’s massive oil sands.
CalPERS also owns tens of millions in company bonds financing TransCanada, which has battled environmentalists, landowners and scientists for a decade over its proposed Keystone XL pipeline, which would transport oil-sands extracts to Texas for global export.
The oil sands, thick deposits of bitumen and dirt from which oil can be extracted, can be refined into 168 billion barrels of oil. By comparison, Saudi Arabia has 264 billion barrels of reserves buried beneath it.
The scientific consensus is that if such vast reservoirs of oil are tapped and burned, climate change will very likely destroy the conditions for life on Earth, causing spikes in temperatures, massive droughts, wildfires, rising sea levels and other catastrophic transformations of the biosphere.
During last week’s Regents meeting, the university’s leaders received a presentation from UC researchers about climate change. Under a business-as-usual scenario, in which carbon reductions are not made, California’s Sierra Nevada snowpack will entirely disappear by 2050. Without mountain snow, California’s cities and agriculture will dry up, according to UC’s scientists.
Sacramento would become an uninhabitable desert.
Sabrina Fang, a spokeswoman for the American Petroleum Institute, said divestment by university endowments is misguided.
“The development of oil and natural gas in America has done more to create jobs and generate revenue than any other industry,” she said.
Fang pointed to a December 2012 study, commissioned by API, that showed oil and gas company investments as producing big returns for universities.
She called the current oil and gas boom in the United States an “unstoppable revolution … helping economic recovery.”
Climate activists have countered with their own research. A recent report by the Aperio Group, an investment-management company, urges endowments and pensions to “do the investment math” when it comes to the question of whether dumping fossil-fuel stocks negatively impacts earnings.
Aperio’s analysts conclude that “the impact may be far less significant than presumed,” and that exclusion of oil, gas and coal stocks is likely to change overall investment returns by only half-of-one-hudredth of a percent.
Another report, circulated by activists and written by the HSBC bank, says sticking with carbon-energy stocks is risky.
HSBC’s analysts note that much of the value of oil-, gas- and coal-company stocks is based on the presumption that these firms will tap and burn their proven reserves. If, however, governments act to reduce CO2 emissions and invest in new technologies to reduce demand, then the value of these stocks could plummet, sticking investors with big losses.
Activists say, however, that dumping dirty-energy stocks should only be the start for cities.
“I hope that in the end reinvestment will become an even bigger movement than divestment,” said Jamie Henn, a spokesperson for 350.org. “There are these huge pools of money sitting in college endowments and state pension funds that could be invested in ways that both deliver a good return and help the environment and community in the process.”
California’s massive pools of pension and university endowment wealth also have global reach. CalPERS money is invested in Russian energy giants like Gazprom and Lukoil and Brazil’s state oil company Petrobras. UC pension funds are tied up with European and Chinese oil and gas companies.
Neither CalPERS nor CalSTRS have taken up the issue of a possible move to divest from carbon-intensive-energy holdings. Bruck said he’s hoping his coalition can press the UC Regents to take up the issue in the fall and perhaps vote sometime next year.
Already seven UC campus student governments and the faculty Senate of UC Santa Barbara have voted in favor of divesting UC’s $71 billion in pension and endowment investments from fossil-fuel companies.
The total endowment holdings for the nation’s 831 largest colleges and universities is estimated to be $406 billion as of last year. Exxon Mobil alone has a market capitalization of $401 billion.