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December 19, 2017

CalPERS Reiterates High Costs of Divestment

This week, the Board of Administration of the California Public Employees’ Retirement System (CalPERS) held its monthly meeting to discuss committee reports and initiatives underway, providing Twitter updates for the public throughout. One admission from the meeting: divestment goes strictly against the fund’s fiduciary duty to its members and beneficiaries.

In addition to the $8.5 billion loss divestment from specific sectors of the economy created, CalPERS also notes how divestment “limits our available investment options” and “increases risk in our portfolio.” Now this costly divestment doesn’t specifically relate to fossil fuels – the fund has consistently rejected divestment from energy comapnies time and again – but it does speak to the high costs energy divestment can impose on a fund by giving up a key part of the economy.  This is exactly why CalPERS unanimously voted in April to drastically curtail its divestment policy, stating CalPERS “generally prohibits divesting in response to Divestment Initiatives” due to its cost and ineffectiveness in achieving social goals.

California State Controller Betty Yee reiterated the decision, stating “We are fiduciaries of this fund.  And our sole focus is and must continue to be how we are going to pay the benefits to our public sector workers and our educators who have earned these benefits during their work life.”

Other pension funds and cities have also rejected divestment for these very reasons, including SeattleNew York State and Vermont.  Next up will be the San Francisco Retirement System, a fund that is set to discuss divestment on January 24. Let’s hope that SFERS leadership takes its lead from CalPERS and other academics who find divestment could cost millions and says no to this empty gesture.