CalPERS CEO Marcie Frost defended the pension fund giant’s climate strategy and reiterated its “pro-investment” approach to addressing climate change in a report given at its March 19 board meeting, a livestream of the meeting showed.
In her report to the board of the $527.9 billion California Public Employees’ Retirement System, Sacramento, Frost addressed a March 11 report from an organization called California Common Good that blasted the pension fund for including traditional energy companies in its climate solutions portfolio.
CCG’s news release said that CalPERS’ climate solutions portfolio “includes billions of dollars invested in many of the world’s most climate-endangering companies, including the five worst U.S. emitters of greenhouse gases, most of the world’s largest oil companies, and other major air polluters.”
In a March 14 letter from Frost to the California Common Good report posted on CalPERS’ website, she said: “The inclusion of low-carbon initiatives from legacy energy companies seems to be California Common Good’s primary objection to CalPERS’ climate strategy. The group’s standard seems to be all-or-nothing. Either a company is 100% ‘green’ or it can’t be considered as contributing any kind of climate solution. We respectfully disagree. We believe a green asset is a green asset, regardless of corporate ownership.”
In her remarks at the board meeting, Frost also referenced the numerous public commenters that appeared at CalPERS’ March 17 investment committee meeting, calling for the pension fund to divest from fossil fuel companies.
“We did hear loud and clear this week from members of the public urging CalPERS to find those new climate investing opportunities and to shed some of the assets on which we relied. Now I can assure those who speak up, we did hear you and we share your goals, but it's how we achieve those goals where we might take issue with some of what was said,” Frost said.
“Addressing climate change is an imperative, but so too is the fiduciary duty of CalPERS, and that duty requires a diversified portfolio that can provide retirement benefits far into the future.”
Frost referred to CalPERS’ approach to address climate change as a “pro-investing” approach that “means more than just betting on today’s green companies. It means investing in technology that might, for now, be an up-and-coming side project for a company.”
She further reiterated the pension fund’s choice not to divest from fossil fuels, saying “divestment would put symbolism over substance,” saying doing so would mean fewer investment opportunities and less diversification, leading to the potential to reduce competitive returns.
“The accusation was that CalPERS thinks oil drilling is a climate solution, but the report's authors know that's not really true. For almost two years, our team has been consulting with outside analysts on how to best count our baseline investments in pro-climate technologies. Some of that technology is being developed by traditional energy companies in which we invest, and we believe it's reasonable to assign an investment value to that technology,” Frost said.
Frost said what CalPERS has long sought is consistency in defining climate solutions.
“Our work has passed muster with a variety of independent analysts. Our methodologies are science based and carefully applied, and as I said last year, we are committed to continual improvement. Our plan sets out an agenda through the end of 2030 and we agree there's a lot of work to be done. We welcome conversation, and we believe in transparency, but we also believe in setting the record straight and ensuring that our investments can fulfill the retirement promises made to our members.”
