Graph of CalSTRS losses

CalSTRS Loses Over $1.63B on Fossil Fuel Stocks Since July 2019

The California State Teachers’ Retirement System (CalSTRS) has lost over $1.63B since July 2019 from investments in fossil fuel companies, according to new analysis by Fossil Free California. The CalSTRS board has so far ignored calls for fossil fuel divestment, refusing to even bring up the topic for discussion at its bi-monthly investment committee hearings.

CalSTRS is the second-largest public pension fund in the US, managing approximately $226.9 billion in retirement savings for almost 1 million public school teachers throughout California. 

CalSTRS’ fossil fuel losses began long before the Covid19 pandemic, which has only exacerbated the traditional energy sector’s increasingly volatile and dismal prospects. Last fall, reports by Toronto-based analysis firm Corporate Knights revealed as of June 30, 2019, CalSTRS had forfeited $5.5B in returns by failing to divest from fossil fuels ten years ago. 

Fossil Free California’s preliminary analysis of recent data looked at CalSTRS’s publicly disclosed oil and gas holdings, focusing on its investments in significant tar sands and fracking companies. The study compared the value of the funds’ stock holdings on July 2, 2019 with the value of the same holdings on May 12, 2020. The study’s findings are in line with other analyses of the traditional energy sector, and it is reasonable to assume that the damage is far more widespread across CalSTRS’ full fossil fuel holdings.

As of June 30, 2019, CalSTRS had more than $6 billion invested in fossil fuel companies, with over $2.2 billion invested in 22 fracking and tar sands majors*. Most of the oil majors in its holdings have been down by double digit percentages since the beginning of 2020. The total value of losses from the assessed tar sands and fracking companies alone, as of May 12, was $1.63B. And if the price of oil stays low, many of these companies face increased risk and potential bankruptcy

Despite repeated demands to divest, and with eight California municipalities now suing ExxonMobil for climate-related damages caused by the company’s 30 year history of consumer fraud, CalSTRS has continued to invest in ExxonMobil. Since July 2019, Exxon stock has dropped by more than 41% — representing a loss of $270 million to the CalSTRS fund.

Major US gas fracking companies such as Apache, Chesapeake, Noble and Occidental are all down 56-97%. CalSTRS’s investment in Chesapeake, valued at $766 million less than a year ago, is now worth less than $23 million. The company had already dropped by 60% on January 6 — a full two weeks before the first reported case of Covid19 in the US. 

The collapse of CalSTRS’ oil and gas holdings isn’t surprising given the sector’s overall poor performance. Last year, S&P 500 Energy companies were down 44% while the rest of the S&P 500 rose by 2%. That’s a 46% difference in performance. Over the first quarter of 2020, the traditional energy sector was down more than 60%, compared to a drop of less than 23% for the rest of the S&P 500.

A performance comparison between S&P 500 Energy Companies and the rest of the S&P 500 over the last year is revealing:

Graph of S&P 500 energy vs S&P broadly
1 year performance of S&P 500 Energy companies (blue) vs all other S&P 500 companies (red).

Divest now

For years, fossil fuel divestment advocates have warned CalSTRS about the financial as well as climate risks of continuing to invest in oil, gas, and coal companies. Multiple studies have shown that divesting from the traditional energy sector causes no drop in returns – and recent data shows that fossil-free investing outperforms indexes that include fossil fuels. In May 2019, California State Treasurer Fiona Ma became the first CalSTRS board member to publicly endorse fossil fuel divestment; but the rest of the CalSTRS trustees and senior staff have steadfastly refused to acknowledge their fiduciary duty to put divestment on the agenda for public discussion. 

CalSTRS claims to want to ‘engage’ the fossil fuel companies, in a vain attempt to influence their corporate behavior and transform them into clean energy companies. Not only is that a fool’s errand – it’s losing California’s teachers billions of dollars. It has never been clearer that CalSTRS needs to divest of these toxic assets.

*  Analysis based on the following fracking and tar sands companies: Apache, Chesapeake Energy, Noble, Occidental, Athabasca Oil Corp., BP, Canadian Natural Resources, Cenovus Energy, Chevron, ConocoPhillips, Devon Energy, ExxonMobil, Royal Dutch Shell (a and b), Teck Resources Ltd., Japan Petroleum Exploration, Husky Energy, Imperial Oil, MEG Energy, Paramount Resources, Suncor Energy.