Commentary
Sometimes you read an article and you just know it’s going to be highly influential. One just
published is, “California’s pension funds are wrecking the planet and losing billions. It’s quite a trick,” by Bill McKibben, a well-known environmentalist, in the Los Angeles Times. He’s pushing California’s
Senate Bill 252, by state Sen. Lena Gonzalez (D-Long Beach). It would, in the bill’s words, require the pension boards “to liquidate investments in a fossil fuel company on or before July 1, 2031.”
It passed the Senate, 23-10, on May 25. It’s now being considered in the Assembly Committee on Public Employment and Retirement. Bolstered by Mr. McKibben’s article, it likely will pass in the full Assembly, then be signed into law by Gov. Gavin Newsom, whose term ends in 2027—if not sooner due to a promotion to the Oval Office.
The reason to divest, according to Mr. McKibben: “There is every reason for these public pension funds to pull their money out of fossil fuels. California’s been hit as hard as any place in the developed world by the climate crisis. These last 10 years have seen drought, flood and fire galore in the Golden State. And something else — by holding those stocks, California has cost itself a great deal of money.”
Before I dig into the details, the main result of this article well could be to reduce the pension funds’ values, which would increase the cost to taxpayers. He doesn’t note it, but because of court rulings under what’s called the California Rule, the taxpayers are on the hook for all payments to retirees.
He writes “a just-released
report from the University of Waterloo, in Ontario, Canada, in partnership with Stand.earth found that CalPERS managed to lose $4.7 billion over the last decade, or $3,163 per pensioner, by staying invested in fossil fuel, and that the smaller CalSTRS managed to lose $4.9 billion, or an astounding $5,114 per beneficiary.”
Whenever something like this comes up, the obvious question no one else seems to ask is: If Mr. McKibben and the university economists are so good at investing, why aren’t they as rich as
Warren Buffett, whose current net worth is $117 billion? He’s the touchstone here, because, unlike Elon Musk, Bill Gates, or other billionaires who are entrepreneurs, he’s built his wealth on long-time “value investing” in many different stocks.
As to petroleum investments, a friend of mine who’s smarter than me in these matters told me, “In fact, petroleum investments are doing well and are a growth component of pension investments. McKibben tries to cross-pollinate the argument.”
I checked. Of the 15 top stocks held by Mr. Buffett,
according to Motley Fool, 13 have been held for more than 10 years. The longest is Coca-Cola at 34 years, followed by American Express at 29 years.
And
according to Investors.com, Mr. Buffet’s company, Berkshire Hathaway, in its Form 13F report from May 15, owns the following shares:
- No. 5: Occidental Petroleum (OXY), 211.7 million;
- No. 7: Chevron (CVX), 132.4 million.
That is, two of Mr. Buffett’s top 10 companies are oil companies. Whom would you trust more with your money, Mr. Buffett—or Mr. McKibben and some unknown economists at Waterloo U.? They’re looking backward, whereas Mr. Buffett is looking to the future.
Mr. McKibben again: “Big Oil did manage to make money in the last 18 months, entirely thanks to Vladimir Putin’s invasion of Ukraine, but as the new report shows, that offered the pension funds just a scant edge of profit during that period and came nowhere close to making up for the losses over the last decade.”
That’s not what happened. There was a bump upwards when the war started in February 2022. But what really happened is oil stocks tanked in spring 2020 as COVID-19 dug in. Remember when oil’s price went below zero? Then the pandemic eased and oil prices went back up. I covered that in The Epoch Times
last Dec. 14, critiquing another distorting L.A. Times article on oil prices. And
on March 29 in, “Newsom’s Fast-Tracked Oil Bill Will Raise Gas Prices.”
And here’s ludicrous alarmism from Mr. McKibben: “In fact, you can measure that impact quite directly. The new study finds that had CalPERS divested a decade ago, its portfolio would have produced 10.8% less carbon, and CalSTRS about 17.6% less. That’s 32 million tons, or, according to the
EPA’s greenhouse gas calculator, the annual carbon footprint of more than 3.5 million homes—almost the equivalent of a Los Angeles. Remember, if we don’t get climate change under control, the Golden State is slated to
lose 70% of its beaches this century—the retirement funds are literally guaranteeing that the state won’t be worth retiring in.” Again, he’s looking backward, not forward.
There’s also a delusion that Mr. McKibben and California politicians will inspire the entire world to go green. But
according to Pensions & Investments, CalPERS invests $9.4 billion in fossil fuels; and CalSTRS
says it invests $4.1 billion. Total: $13.5 billion.
That’s out of a global oil and gas industry market size of $4.3 trillion in 2023,
according to IBISWorld. So CalPERS + CalSTRS’s $13.5 billion is just 0.31 percent of the global market. It’s like losing a couple drops to the pavement from the fuel nozzle when you fill up your gas-guzzling flivver.
If that $13.5 billion ends up being divested, the shares will be scooped up by an eager global market more influenced by Mr. Buffett’s choices than the latest posturing fad of a state mocked globally for its mismanagement. No wonder both pension boards oppose SB 252.
Then there’s another thing I’ve
written about several times in The Epoch Times: Other countries, especially Communist China, are not being inspired to divest from fossil fuels, but instead are building hundreds of new coal-power plants. Of course, as I also
wrote just last week in “California Climate Policies Only Empower China,” they’re happy to sell Californians shiny, new solar power panels, for some technologies in which they control 95 percent of the global market share.
So, independent of Mr. McKibben’s bad arguments, should CalPERS and CalSTRS stay invested in fossil fuels? Unlike him and the Canadian economists, I don’t presume an opinion writer like me should give investment advice. My specialty is critiquing bad policy arguments, not making money. The two giant pension funds hire many professionals to figure out those things. That’s their job, and they should not be interfered with at the risk of hurting the funds—with California taxpayers once again forced to pick up the bill.
Views expressed in this article are opinions of the author and do not necessarily reflect the views of The Epoch Times.
