Divestment and pension funds
by Andrew Walzer
Update on Divestment Campaign...
As readers of this newsletter know, we have been tracking the movement to divest CalPERS and CalSTRS from fossil fuels. Last year, environmentalists and labor activists reintroduced SB 252, the Fossil Fuel Divestment Act, that previously had stalled in an assembly committee. The bill once again passed the State Senate. It then went to the State Assembly Public Employment and Retirement Committee chaired by Assemblymember Tina McKinnor. McKinnor so far has refused to bring the bill up for a committee vote, citing concern about the negative financial impact that divestment may have on the pension funds, and the lack of union member support. She is planning on having a public forum to air the pros and cons of the bill before bringing it to a vote.
Both AFT 1521 and CFT have endorsed the bill, and we want to encourage members to send letters both to Assemblymember McKinnor and to their local assemblymember in support of the bill. Your letter should state that you are a member of the CalSTRS or CalPERS retirement plan and that you support divestment from fossil fuels.
I want to briefly address the concern about the financial implications of divestment.
First, several studies have found that divestment is likely to improve the returns of pensions because already fossil fuels are underperforming the general market and are becoming increasingly volatile.
Secondly, both CalSTRS and CalPERS are defined benefit plans, which means that our pension benefits are guaranteed and are not affected by the financial fluctuations of the market. In fact, neither CalSTRS nor CalPERS are fully funded, meaning that their current investments are not enough to cover their future obligations. And although legislation was passed to increase both employer and employee contributions to the fund, no one is very worried about the unfunded liability because the state is required step in to cover any shortfall and to fully fund future retirement commitments.
So, there is no realistic basis to worry about divesting from fossil fuels because our pensions are guaranteed. The argument that we will lose our pensions is a red herring, intended to distract us from the real issue, which is that the ecosystems upon which we are dependent are wasting away, which will cause catastrophic loss of life. Even the International Energy Agency agrees that we must phase out fossil fuels rapidly for humanity to survive the climate crisis.
So what is the real fear about divestment? I think there is an intuitive sense that the burning of fossil fuels undergirds the wealth of contemporary industrial society, and that transitioning away from fossil fuels will diminish our collective wealth. And I think that this concern is rational. The transition to a sustainable future does require us to moderate our use of resources, both individually and collectively. Already this transition is happening, and we must protect our pensions and our lives by investing in the future not our destruction.