California lawmakers are pushing CalPERS to divest from the controversial Dakota Access Pipeline, but pension fund staff have balked at that recommendation, arguing that the country’s largest pension fund can more effectively engage with companies if it remains a shareholder.
This is the latest instance of the ongoing debate over divestment at public pension funds. On one side, observers say that large institutions should divest from energy companies that contribute to climate change.
But pension professionals argue they can more effectively push for corporate change if the pension fund has a “seat at the table” — in other words, that institutions can affect change more effectively when they remain shareholders.
More on the CalPERS situation, from Reuters:
California Public Employees’ Retirement System should maintain its investments in the controversial Dakota Access oil pipeline project in order to exert influence over the companies involved, staff for the largest U.S. public pension fund said on Monday.
Legislation proposed in California would require CalPERS, a $300 billion fund, to divest from companies involved in the building and financing of the 1,168-mile-long underground pipeline project, which would affect an estimated $4 billion in CalPERS holdings, according to staff.
CalPERS staff said that while divesting stocks of companies involved in the project may reduce stakeholder perception that the fund’s investments contribute to climate change, the move would limit CalPERS ability to change corporate behavior through engagement.
“There is considerable evidence that divesting is an ineffective strategy for achieving social or political goals, since the consequence is generally a mere transfer of ownership of divested assets from one investor to another,” staff said in its recommendation, which was published on its website.
The CalPERS investment committee will discuss the bill at its meeting next week.