The U.S.’s largest pension fund has classified more than $3 billion of holdings in oil drillers, coal miners, and other major greenhouse gas producers as climate-friendly investments, according to a new analysis of public records.
Stakes in Saudi Aramco, Chevron Corp. and Chinese coal company Inner Mongolia Dian Tou Energy are among the holdings that California Public Employees' Retirement System labeled as “climate solutions.”
The findings are part of a report from California Common Good, a coalition of environmental advocates and public sector unions. The group, which has called for CalPERS to divest from major oil and gas companies, is staging protests March 11 at Chevron’s San Francisco Bay Area refinery and in the burn zone of the Eaton fire near Los Angeles.
CalPERS has set ambitious targets to be a leader in green investments, with a goal of doubling its climate-related holdings to $100 billion by the end of the decade. Yet its climate portfolio now includes 52 of the world's largest greenhouse gas emitters, the report shows. The companies are part of the pension fund's $26.1 billion tally of stocks that it considers “climate solutions” as part of its broader $214 billion in equity holdings.
“This is not in the spirit of what was intended,” said Patrick McVeigh, a climate-focused investor who manages over $4 billion at Reynders, McVeigh Capital Management. “It was meant to invest in companies leading the transition to a low-carbon economy. Clearly, fossil fuel companies are not.”
CalPERS, which discloses its stock holdings publicly, didn’t dispute the report.
The investments are part of an accounting method the fund uses that allows it to classify portions of public equities as climate investments based on the companies' green business activity. Spokesperson John Myers said that CalPERS’ tally of climate investments is a “dynamic process that continually seeks to reflect best practices” while backing the fund’s strategy of remaining invested in major oil and gas companies.
“Choosing a pro-investment approach rather than wholesale divestment is not only pragmatic but also consistent with our fiduciary duty to provide long-term benefits to more than 2 million CalPERS members and beneficiaries,” he said.
The report highlights the challenges CalPERS and other major investors face in balancing financial returns with climate commitments. Managing over $500 billion in assets, CaPERSs has argued that its influence can push polluting companies toward greener practices while also funding clean energy technologies. The strategy, the fund contends, helps generate returns while mitigating long-term climate risks for its more than two million members.
“They’re facing a dilemma. CalPERS wants these companies to really make progress,” said Hortense Bioy, head of sustainable investing research at Morningstar. “But if their progress hasn’t been great, there aren’t better companies to invest in.”
CalPERS’ climate priorities have increasingly put it at odds with broader market trends.
President Donald Trump’s administration rolled back renewable energy incentives, while major corporations have scaled back climate pledges. BP, included in CalPERS’ climate portfolio, recently announced its intention to increase oil and gas spending by 20%. Shell, another climate holding, recently ditched plans for an offshore windfarm in New Jersey and scaled back its planned carbon-emissions cuts.
In 2023, CalPERS set a goal of halving its portfolio’s carbon footprint by 2030. To reach that target, it has pledged to double green investments to $100 billion by the end of the decade. The move comes after years of pressure from state lawmakers and environmentalists to fully divest from fossil fuels.
As part of its approach, CalPERShas adopted an unconventional accounting method—classifying portions of existing public equities as climate investments.
CalPERS’ classification of portions of equities as climate-friendly differs from investors such as the California State Teachers Retirement System, which invests 20% of its stocks in an MSCI low-carbon index fund to meet its climate targets.
CalPERSuses data compiled by the Financial Times Stock Exchange, HSBC and MSCI that attempts to quantify companies’ green business activity. It also uses data from Blackrock Inc. to measure corporate bonds that are related to sustainable projects.
Using that methodology, CalPERS categorized about 1% of its Saudi Aramco holdings as climate-friendly, along with stakes in PetroChina, Marathon Petroleum, cement producers, chemical manufacturers and other high-emission industries that have pursued some climate-related initiatives.
Many of these companies have seen their carbon emissions increase. CalPERS’ largest single holding is $2.4 billion in the tech giant Nvidia Corp., which has increased emissions by more than 30% since 2021 due to soaring demand for artificial intelligence.
“What’s the purpose of this $100 billion fund?” asked Crystal Zermeno of California Common Good. “Is it about math and what gets counted—or is it about reducing climate risk to beneficiaries?”
CalPERS said its strategy is evolving. Late last year, the fund slashed Exxon Mobil Corp.’s classification in its climate solutions portfolio by 98%, to around $2 million. Chief Executive Officer Marcie Frost has called for greater corporate transparency on climate risks. “There’s more art than science in defining an investment as a ‘climate solution,’” she said in a December statement.
CalPERS’ decisions could influence billions in investment dollars. If the fund fails to show progress, it could face renewed pressure to divest from fossil fuels—a move it has warned would hurt returns. CalPERS declined to provide examples of how its investments in major polluters have reduced emissions.
State Senate Majority Leader Lena Gonzalez, a Democrat who sponsored legislation to force CalPERS to divest from oil and gas assets, said more transparency is needed. “CalPERS’ climate action plan is a step in the right direction by committing to invest $100 billion in climate solutions,” she said. “More transparency about what these climate solutions are and ensuring that hardworking Californians’ retirements are not funding false solutions will be key.”
Beyond stocks, CalPERS has classified about $24.1 billion in private assets such as real estate, infrastructure and private equity as climate investments. While basic information about all private assets are publicly disclosed, the pension fund has declined in most cases to specify which ones it considers climate solutions, citing legal constraints. It also doesn’t disclose specific methodology for selecting private assets as climate investments.
