“CalSTRS’ history of engagement activities has resulted in better relationships and outcomes across global industries.”—From a CalSTRS report provided to CTA State Council
Much like tobacco and firearms before, holdings in fossil fuels by the State Teachers’ Retirement System (CalSTRS) are inspiring healthy debate about sustainable investments and associated costs among some educators. Prudently managing a $223 billion retirement fund to provide stability for more than 950,000 members includes making diversified investments, sometimes in industries with environmental and social implications.
As global impacts from the climate crisis become more apparent every day, a growing number of voices are calling for complete divestment from the fossil fuel industry by CalSTRS. Others, including CalSTRS managers, believe that the best way to support sustainability is to continue investing in the industry to engage fossil fuel corporations and influence them to adopt best practices. The retirement fund has been a forerunner in sustainable investing for more than two decades, striving to provide stability and growth while influencing changes in public policies and corporate practices.
In November 2018, CalSTRS signed on with an array of other retirement fund managers to the Principles for a Responsible Civilian Firearms Industry, which has already influenced multiple parts of the firearms industry chain. These systems, with combined assets of $5 trillion, are working to get retail chains to adopt best practices that see federal requirements for gun sales as the floor rather than the ceiling, encouraging the industry to adopt stricter rules than law requires.
CalSTRS partners with sustainability-minded investors to enhance influence around other issues that potentially impact the fund, including climate action, opioid accountability, and diversity in corporate boardrooms. “CalSTRS’ history of engagement activities has resulted in better relationships and outcomes across global industries,” according to a CalSTRS report provided to CTA State Council in October.
While the debate about whether dialogue or divestment is the best path to sustainability continues, the health and vitality of the fund is of chief concern to both CalSTRS and CTA. Divesting completely from fossil fuels at a time when CalSTRS still has a significant unfunded liability endangers the stability of the pension system. CalSTRS has a fiduciary responsibility to defend the retirement fund from significant risk and has sought to engage rather than divest to best protect the health of the system.
In 2017, despite many calls for divestment from the Dakota Access Pipeline, CalSTRS chose to engage corporations and banks about concerns of the Standing Rock Sioux Tribe that their voices were not being heard. Divestment would have adversely impacted the fund by between $8 billion and $10 billion, according to estimates. Instead, CalSTRS took an active role in the situation, advocating for indigenous rights and environmental protections with the corporations and banks involved in the project.
Protecting the fund
CTA policy is clear on the top priority when it comes to the retirement fund: “The Retirement Systems should have as their primary investment goals to preserve the principal and maximize the growth and income when selecting and retaining securities.” And the experts generally agree that full divestment from fossil fuels would hurt the fund. The next line in the policy is also pertinent to the debate: “Non-economic factors must be considered in making investment decisions.”
At least one CTA local has adopted its own resolution on the issue, with Oakland Education Association strongly urging CalSTRS to stop any new investment in fossil fuel companies and ensure none of its investments include holdings in fossil fuels, beginning immediately. United Teachers of Richmond’s executive board has also voted to support divestment.
California Educator will continue to monitor this issue and provide updates as they arise. For more information on CalSTRS’ sustainability beliefs and practices, visit calstrs.com/sustainability.