Environmental activists are demanding that CalPERS show leadership, as the nation’s largest public employee pension plan, by divesting from the Dakota Access Pipeline project. But staff have reportedly recommended against divestment.
The Sacramento Bee reported that 150 people protested at a Sacramento Board meeting of the California Public Employees Retirement System (CalPERS) to demand the $309 billion public employee pension fund immediately divest one million shares and tens of million of dollars from the bonds of the pipeline’s parent, Energy Transfer Partners, L.P. (NYSE: ETP).
Although there were no members of the Standing Rock Sioux Tribe — whose lands are near the pipeline route — present, about 50 liberal politicians, environmental activists and retired state employees spoke during the public comment section of CalPERS February monthly board meeting. Protestors demanded divestment, accusing the pipeline’s investors of not respecting treaties, human rights, and the environment.
CalPERS member Anne Luna-Gordinier received a cheer from the crowd when she complained about, “This filthy energy.” Luna thundered, “It’s violent and oppressive and it’s not going to lead us to where we need to be today,” according to an article by the East Bay Express.
The CalPERS protest follows the U.S. Army Corps of Engineers’ grant of a 1,095 foot easement on their property on Feb. 8. The action will allow the construction of the pipeline under Lake Oahe in North Dakota. The controversial section of the Dakota Access Pipeline that crosses the lake will be built 65 feet under two exiting oil and gas pipelines. There are also another 5 existing oil and gas pipelines that pass under Lake Oahe.
The White House directed the Department of Defense to take all necessary and appropriate steps to permit construction and grant an operating license for the 1,178-mile-long pipeline, which stretches from North Dakota to Illinois.
Dallas-based Transfer Partners announced that “having received all federal authorizations necessary to proceed expeditiously to complete construction of the pipeline,” they expect to secure debt financing and the close of a sale of a minority equity interest in the pipeline quickly.
Although the board members seemed empathetic to protests by their members, staff the following day recommended that CalPERS board members oppose Assembly Bill 20, titled “Dakota Access Pipeline: Divestment.” The legislation would prohibit both CalPERS and the California State Teachers’ Retirement System from making additional investments in, and be required to sell all holdings in, the companies constructing, or funding the Dakota Access Pipeline by July 1, 2018.
The CalPERS’ staff found that AB 20’s only divestment benefit would be to “reduce stakeholder perception that CalPERS’ investments contribute to climate change.” Staff emphasized that CalPERS board members have fiduciary obligations to the participants and beneficiaries of the retirement system that “preclude CalPERS from sacrificing investment performance for the purpose of achieving goals that do not directly relate to CalPERS operations or benefits.”
Staff also was concerned that AB 20 would impede CalPERS’ ability to maximize risk-adjusted returns and achieve diversification, and risked increasing the future likelihood that “external parties” would be able to direct portfolio activities.
CalPERS’ board tends to be sympathetic to divestment protests by their members, but they turned down a concerted 2013 effort by the “Campaign to Unload” that sought a similar ban on investing in arms companies. The board now knows that such action would have been a mistake, since prices for gun manufacturers’ stocks have risen by 1,600 percent since 2009.
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