The California Public Employees' Retirement System (CalPERS) is the largest public pension fund in the US, with more than $470 billion in assets.
CalPERS seems to have an unshakeable faith in the ability of shareholder engagement to transform fossil fuel companies into clean energy providers. This report reviews CalPERS’ engagement history with 10 selected Big Oil companies from its portfolio, to test whether engagement is producing real-world results.
We looked at CalPERS’ proxy voting patterns and companies’ reports on greenhouse gas emissions to determine the effects of engagement. So far, the clearest result has been a “net zero by 2050” pledge by most (but not all) of these companies.
Our research gave us greater insight into the complex and difficult path that CalPERS has chosen. We found that companies’ self-reported emissions data may not be reliable; that even large investors such as CalPERS have limited access to company directors; and that even the leverage of a multi-trillion-dollar coalition such as Climate Action 100+ may not be sufficient to change the course of the “business as usual” juggernaut of the fossil fuel industry.
We conclude that engagement alone is unlikely to convince fossil fuel companies to transform at the speed and scale required. When companies fail to change after years of engagement, divestment should be the consequence.
CalPERS views divestment as a last resort, but it’s worth noting that fossil fuel companies themselves use divestment to lower their greenhouse gas emissions or to meet other business objectives. The ultimate goal is to diminish the continued production of fossil fuels, no matter who owns the shares of the producers.