Some rallied activists and environmentalists turned up the heat this year on divestment efforts across the nation targeting pension funds, endowments, and institutions that have fossil fuel holdings as part of a broader, diverse stock portfolio.
The California State Teachers’ Retirement System (CalSTRS) quickly became a top-target for divestment supporters. CalSTRS released a short video explaining its reasoning not divesting and its mission to engage with companies.
CalSTRS rightfully notes, “Divestment undermines our long-term strategy and increases risk.” If pension funds are restricted this poorly positions and limits the returns the fund receives. This goes against the fiduciary responsibility that fund managers are required to act. It is important to note that divestment does not affect social change making the pro-environment plan unaccomplished.
Most importantly, by divesting the fund removes its rights as a shareholder to influence – or engage – the company directly. The video released by CalSTRS gives two notable examples of successful engagement stories that would otherwise not be possible if the fund divested from the two fossil-fuel companies.
There are recognized damages to pensioners and teachers if funds divest from companies based on political ideology. However, the benefits are not widely as studied or understood. CalSTRS should be applauded for protecting pensioners while also making direct efforts to protect our environment.