Five Questions Congress Should Ask the Climate Cartel — Are You Happy With That?

Via Matt Cole

Mine old boss CalPERS just suffered a humiliating defeat in a vote against Exxon’s board of directors. Its losing streak continued last week when the House Judiciary Committee grilled it on Climate Action 100+ “climate corporation,” helps pension funds like CalPERS work with asset managers and nonprofits to divest fossil fuels. CalPERS is the brains and brawn of the corporation, established and using its $500 billion weight to pressure companies like Exxon to comply. Here are five questions I wish Congress had asked.

1. What is the case for investing in cutting fossil fuel production that will increase Exxon shareholder returns?

Interim CIO Dan Bienvenue began by asserting that “Climate change is an existential risk,” and responded to questions about CalPERS’s anti-fossil fuel actions by repeating, “Climate change is real.” Clearly, CalPERS wants to portray any opposition to its work as a disagreement with the science itself. But there is a big leap between declaring that climate change is real and concluding that producing less oil will make an oil company more money.

Scientists don’t say climate change is an existential risk: such a review of the research put it“A century of climate change is as bad as a year of lost economic growth.” Ending the use of fossil fuels will make an energy-starved world much more expensive, especially when AI neck electricity. The argument that Exxon must destroy its business to save it is political, not financial. Congress could expose that if it pressed activists to produce solid evidence instead of giving them the high scientific ground.

2. Has CalPERS ever used its ownership in oil companies to artificially increase its investments in green energy?

If cutting oil and gas production doesn’t make the Exxons and Chevrons of the world more money, who will it benefit? Recent CalPERS Green Energy Industry commit invest 100 billion USD in.

In early 2023, California enacted SB 252, requiring CalPERS to divest from fossil fuels. Pension protest it, rightly notes that divesting for social causes would impact its bottom line but affirms its “strong commitment to reducing greenhouse gas emissions.” Half a year later, it made promises of massive climate solutions.

The Judiciary Committee focuses on Climate Action 100+’s fight against fossil fuels, but that goes hand in hand with efforts to artificially boost demand for wind and solar energy, which raises separate issues of fiduciary duty and anti-competitive conduct. I asked CalPERS’s PR director about this conflict of interest in public relations. exchange-No answer. Perhaps Congress will have better luck.

3. Where does $100 billion of new green investment come from?

The math is simple: CalPERS has $500 billion, invested in a variety of asset classes that it thinks will maximize risk-adjusted returns. They don’t have $100 billion in reserves for green investments. Asset allocation is a zero-sum game: if they invest 20% of their portfolio in climate solutions, they have to get it from somewhere else. Where and at what cost? If divesting from an industry hurts portfolio returns, as CalPERS learned when it missed nearly 4 billion USD by divesting from tobacco, transferring huge wealth from certain classes to the politically favored class has the same result.

4. If CalPERS DEI activities aim to ensure viewpoint diversity, why does it only measure racial and gender diversity? Does it believe that different races think differently?

Bienvenue repeatedly refused to answer direct questions about whether CalPERS voted for or against board members based on their skin color. To do so is clearly racist. This should have been a softball.

The Commission could emphasize the question by focusing on the fact that “key highlights” of CalPERS’s DEI investments report It only highlights diversity in terms of race, gender, and “historically underrepresented groups.” It doesn’t identify a single example of voting or engagement to improve diversity of “skill sets” or “competencies,” unless you define those things through the lens of race or gender.

Does CalPERS manage its portfolio companies based on the theory that men are from Mars and women are from Venus? Does it assume that whites and blacks have different skill sets and abilities? Its beneficiaries deserve to know.

5. If all this ESG investing is about making money, why are your returns so low?

The beneficiaries, the current and soon-to-be retirees, are the ones who end up paying the price for all this wasteful experimentation in ESG investing. CalPERS has developed poor work habits: it reported returns of 5.8% last year, in line with the five-year average. This is well below the roughly 7% needed to meet future obligations—on its current roadmap, the company meets only 72% of retirees’ funding needs.

That abyss is the reality I struggle to challenge every day as a CalPERS portfolio manager. The lack of urgent need to close it is why I had to leave to defend our capitalist system elsewhere. ESG investing promises vague returns in some distant future, but my friends and family, whose retirement relies on CalPERS, need it to perform better today instead of quickly double the amount of loss.

Matt Cole is the CEO at Strive for asset management

This article was originally published by RealClearEnergy and is available via RealClearWire.