Pressure Mounts on CalPERS to Ditch Fossil Fuels

At least 11 people spoke up at the most recent California Public Employees’ Retirement System (CalPERS) board meeting, urging the pension to divest from fossil fuels and taking up more than half the allotted time for public comments.

CalPERS currently has approximately $30 billion invested in fossil fuels, making the allocation 6% of its total $495 billion portfolio. Within CalPERS, there are still many who believe that by wielding its influence as a major shareholder, the fund can help fossil fuel companies transition to becoming greener from the inside. This strategy, known as “engagement,” is controversial.

One board member, Margaret Brown, was among the voices that spoke for divestment, saying the CalPERS board should direct investment staff to pull out of the industry. “I don’t believe engagement is working,” she said.

Brown has developed a reputation as a contrarian voice on the CalPERS board, often being one of the only dissenting voices in investment decisions. She recently lost her campaign for re-election to the board and will be leaving her position in January.

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For now, official CalPERS policy remains committed to the engagement strategy. “So far we have 111 companies with net-zero commitments by 2050,” said Anne Simpson, managing investment director of board governance and sustainability for CalPERS. Simpson pointed to the Climate Action 100+’s recent progress report as proof that the engagement strategy works. The investor-led initiative encourages fossil fuel companies and other greenhouse gas emitters to achieve net-zero carbon emissions.

Nevertheless, there are those who remain skeptical of the strategy, saying these commitments are not legally binding enough. Carlos Davidson, a public commenter from the California Faculty Association, said engaging with these companies is only prolonging their ability to harm the environment. “Despite more than a decade of yours and others’ efforts at shareholder engagement, fossil fuel companies remain the single most powerful obstacle to governments addressing climate change,” he said.

Simpson disagrees, saying that even though the commitments are not legally binding, companies will still be forced to fulfill their promises. “The consequences of not responding will be seen through proxy votes at the AGM [annual general meeting],” she told CIO via email. She cited ExxonMobil’s reluctant recent installment of three net-zero-minded directors at the behest of institutional investors this past summer as proof of shareholder power.

But many still worry that fossil fuels are not only harmful to the environment, but are also unprofitable. A study by the Canadian research organization Corporate Knights showed that CalPERS has lost approximately $11.9 billion by being invested in fossil fuels from 2009 to 2019.

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Tags: California Public Employees’ Retirement System, CalPERS, Climate Change, ESG, Fossil Fuels, Margaret Brown, Net Zero, Pension, Sustainability

Maybe gold and Bitcoin aren’t that different after all and can end up as desirable refuges during inflationary times and other periods of economic instability. That’s the contrarian take on the two asset classes that many view as polar opposites, from Peter Boockvar, CIO at Bleakley Advisory Group.

“They have a lot of commonality,” Boockvar told CNBC. “They can very much complement each other.” He noted that gold lovers and Bitcoin fans are both against central banks and “want a stable currency.”

A Bloomberg Intelligence report agreed and pointed out that, while gold’s price is less volatile than that of Bitcoin, they both have virtually zero correlation to traditional asset classes, i.e., stocks and bonds.

There has been a lot of talk about the leading digital currency supplanting gold as a store of value. JPMorgan has opined that the price of gold would “suffer” at the hands of Bitcoin, the leading cryptocurrency. Thus far this year, the crypto offering seems to have the edge: Bitcoin has doubled in price, while gold has fallen slightly, down 2.2%. But lately, the momentum has shifted to the precious metal, up 0.4% Tuesday and 5.7% for the past 30 days, with Bitcoin falling 4.4% yesterday and off 1.4% since mid-October.

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Any number of factors could be at work to animate the recent price swings. Talk is rife in Washington and in other nations’ capitals about the regulation of Bitcoin and other digital denominations. No one is thinking about regulating gold. Historically, gold has been the go-to sanctuary amid rampant inflation, economic downturns, or civil unrest. Some think that the recent inflation leap, up 6.2% in October annually, may have resurrected gold’s longstanding role as the commodity that flourishes when times get iffy.

To Boockvar, the notion of gold’s eclipse is absurd. Pronouncing himself a “gold bug,” he explained that “something that has been around just 13 years won’t replace something that has been around for thousands of years.” Indeed, gold is obviously different from Bitcoin in that the metal has a physical presence and is difficult to move. A gold bar, which is about the size of a brick, weighs around 25 pounds. That gold bar, at $1,856 an ounce as of Tuesday’s market close, is worth $742,400. Transporting 10 of them (more than $7.4 million and weighing 250 pounds) is laborious. With Bitcoin, an equivalent amount could be transported with a few clicks.

But both assets will come to be seen by investors as close cousins, Boockvar reasoned, and even interchangeable. “I don’t believe you’ll have to choose between one or the other” as the better bet, he contended.

Bitcoin, now widely regarded as a speculative asset, as opposed to gold, will in time be recognized as a solid store of value, Bloomberg predicted. Meanwhile, the report went on, “many institutions and investors are converting at least small portions of their gold positions to Bitcoin as a hedge and diversifier.”