OPEN LETTER TO THE BOARDS OF DIRECTORS OF CalPERS AND CalSTRS

We are writing to you as rank-and-file California union members to request that CalPERS and CalSTRS instruct their retirement portfolio managers to divest from all fossil fuels.

Fossil fuels are harming our communities by emitting toxins into the air and water. In California alone, 7.4 million people, the majority of whom are people of color, live within 1 mile of oil and gas drilling operations - this does not include the millions more living near refineries and other fossil fuel infrastructure. Fossil fuel toxins are known to cause cancer, migraines, asthma, and infertility, and to increase the risk of dying from COVID for residents within 2.5 miles of drilling and refining [1].

While fossil fuels may have provided lucrative returns in the past, we have entered a new era of volatility signaled by a growing number and severity of disasters caused by climate change, growing opposition to fossil fuels, an accelerating transition to sustainable energy sources, and wars (such as Russia's invasion of Ukraine). This volatility will no doubt grow worse over time. As the country and the world transition to renewable energy sources, fossil fuels will become "stranded assets," left in the ground in the wake of this transition, and the value of fossil fuel company stocks will drop.

These public employee pension funds have a fiduciary duty to their beneficiaries to avoid investments in stocks that will predictably decline in value, and be subject to increasing volatility.

The argument that "shareholder engagement" is a more effective approach than fossil fuel divestment in reducing greenhouse gas emissions is not supported by the facts. In spite of CalPERS’ very active shareholder engagement, Exxon, Shell, Chevron, Total, and others have presented no realistic plans to comply with the Paris Agreement objective of keeping the increase in global warming to 1.5 degrees celsius, despite their pledges to do so. In fact, numerous studies show that Big Oil continues business as usual with plans to increase exploration and production [2,3]. “Net zero” pledges and reliance on unproven technologies like carbon capture are Big Oil’s preferred method of greenwashing and delaying real action.

The recent and growing wave of fossil fuel divestment campaigns has bolstered the perception that fossil fuels are an increasingly risky and unreliable investment. (The Chicago Teachers Pension Fund recently announced its intention to divest $350 million from fossil fuels in favor of renewable energy [4]. Last year the NYC public employee and teachers pensions funds also divested from fossil fuels [5].) PERS and STRS should not be caught at the end of the wave, having to unload fossil fuel stocks after the price has collapsed.

Finally, it is simply not possible to continue to extract and burn fossil fuels and avoid climate catastrophe [6]. We are therefore faced with three choices:

(1) We help shape a managed decline to a sustainable alternative, which includes a just transition for affected workers and communities;

(2) We stand by passively while an unmanaged decline in fossil fuel extraction takes place. In this case, a just transition is far from likely, let alone guaranteed; or

(3) We suffer the consequences of runaway climate change and an unrecognizable planet in which human survival is at risk, and retirement plans go up in smoke as society starts to break down.

We choose the first option, and you should do so as well. The longer we drag our feet, the more likely the second or third scenarios become. We're already moving in that direction. But it is within our power to avert that fate if we act decisively now. We can take action now and divest from all fossil fuel companies. It is both the morally correct and financially responsible choice.

[1] “7 million Californians live near oil and gas wells. This bill could change that.” https://grist.org/climate/7-million-californians-live-near-oil-and-gas-wells-this-bill-could-change-that/

[2] ”Oil and Gas Industry's Expansion Plans Decried as Attack on 'Livable Planet“ https://www.commondreams.org/news/2022/11/10/oil-and-gas-industrys-expansion-plans-decried-attack-livable-planet

[3] “Big Oil Reality Check-Assessing Oil & Gas Company Climate Plans” https://priceofoil.org/content/uploads/2020/09/OCI-Big-Oil-Reality-Check-vF.pdf

[4] “Chicago Teachers’ Pension Fund to Reorientate Portfolio to Fully Offset Fossil Fuel Investments” https://www.ai-cio.com/news/chicago-teachers-pension-fund-to-reorientate-portfolio-to-fully-offset-fossil-fuel-investments/

[5] “NYC Pension Funds to Divest $4 Billion From Fossil Fuels” https://www.nbcnewyork.com/news/local/nyc-pension-funds-to-divest-4-billion-from-fossil-fuels/2849750/

[6] “The world has nine years to avert catastrophic climate warming” https://www.digitaljournal.com/world/the-world-has-nine-years-to-avert-catastrophic-climate-warming/article

Signed...