CalPERS Doubles Down on Failing Climate Change Investments

The substantially under-funded and under-performing California Public Employees Retirement System (CalPERS) that covers over 2 million participants announced that that was doubling down on its failing investments in climate change.  

CalPERS as the largest public employee defined benefit pension fund with over 2 million participants and $462.8 billion in invested assets, reported July 2023 that its estimated funding status was about 72%, or about $180 billion underfunded taxpayer liability.  Good public pension plan funding levels are at 80%, such as Washington State at 107%, New York at 95%, Wisconsin at 94.7%, Florida at 87% and Texas at 79%.

CalPERS unfunded status would be much worse, but the mammoth pension fund estimates that it will earn at least 6.8% every year without loss for the next 30 years.    

Despite a very-hot stock market for the last three years, CalPERS investments have dramatically underperformed most other public pension plans due to its commitment to Environmental, Social and Governance investing.  ESG is basically code words for climate change and excluding oil, gas and mineral extraction investments that outperform during inflation.  Those excluded investments have outperformed under the Biden Administration’s massive annual deficit spending that will hit $1.1 trillion this year.

Just since 2021, Environmental investments underperformed common stock indexes by -2.75 per cent, while Social responsibility investment underperformed by -1.33% and corporate governance investments underperformed by -1.66 per cent.  As a result, CalPERS in the last three years lost about $14 billion by focusing on ESG.

Despite ESG failure, CalPERS investment committee announced its Chief Executive Officer Marcie Frost would become Chairman of Climate Action 100+ that represents more than 700 institutional investors engaging companies to improve their climate change governance, cut emissions, and strengthen climate-related financial disclosures.

CalPERS stated: "Our organization played a pivotal role in creating Climate Action 100+, claiming that “at a crucial moment, one where our fiduciary duty requires swift and substantive action on climate change to ensure long-term value for our members, their families, and their retirement security."

CalPERS doubling down on ESG comes as the political backlash against ESG has been intensifying.  Republican and Libertarian politicians in the United States that oppose what they call “Greenwashing” as a game of corporations making false or deceptive claims about the environmental benefits of their products, services or policies.