The CalPERS board on Wednesday voted to oppose a California bill that would prevent the $457.4 billion pension plan and the California State Teachers' Retirement System, West Sacramento, from making new investments in fossil fuel companies and require them to divest from such companies by July 1, 2030, if consistent with the boards' fiduciary duty.
California Public Employees' Retirement System, Sacramento, has $9.4 billion invested in fossil fuel companies that would have to be divested should the bill become law, said Danny Brown, chief of CalPERS' legislative affairs division at Wednesday's meeting. The transaction cost of divesting that investment and reinvesting the capital into other investments would range between $75 million and $125 million, he said.
"While CalPERS recognizes climate change is a risk to our investment portfolio and can appreciate what the (bill's) author and sponsors are trying to accomplish, we disagree with the approach," Mr. Brown told the board. "There's no evidence if CalPERS were to sell its stock in these companies to other investors it would have any impact on the demand for fossil fuel or reduce the volume of greenhouse gas emissions into the atmosphere."
What will change is that CalPERS will no longer be able to work with other shareholders to push for change and those who buy CalPERS' shares may not have the same sustainability concerns, Mr. Brown said.
Frank Ruffino, representing State Treasurer Fiona Ma, who is a CalPERS board member, said that the Ms. Ma supported the bill.
"Recent studies have shown that divestment from fossil fuels actually improves not weakens investment returns, proving that divestment is entirely consistent with CalPERS missions and fiduciary duties," Mr. Ruffino said.
He also noted that the bill includes language exempting CalPERS and CalSTRS from taking any action on divestment "unless the board determines in good faith that the action is consistent with the board's fiduciary responsibility."
Separately, CalPERS CEO Marcie Frost announced at the meeting that James Andrus, interim managing investment director for board governance and sustainability will be retiring on March 18. Mr. Andrus was financial market strategist before being named to the interim post in January 2022 after Anne Simpson left CalPERS to join Franklin Templeton as global head of sustainability.
"He (Mr. Andrus) did a lot of work here in the U.S. and globally pushing for the rules to make the markets a better place for investors like CalPERS," Ms. Frost said.