GOOD MORNING TO THE RESPECTIVE
COMMITTEE MEMBERS. AND TO THE
PUBLIC. WELCOME TO THE JOINT
INFORMATIONAL HEARING OF THE
ASSEMBLY COMMITTEE ON PUBLIC
EMPLOYMENT AND RETIREMENT. AND
THE CITY COMMITTEE. SENATE
COMMITTEE ON LABOR, PUBLIC
EMPLOYMENT AND RETIREMENT. THIS
IS THE SECOND YEAR, AND I'VE HAD
THE PLEASURE TO CHAIR THE
ASSEMBLY COMMITTEE, AND I'M
LOOKING FORWARD TO HEARING FROM
REPRESENTATIVES FROM THE
CALIFORNIA ACTUARY ADVISORY
PANEL, CALPERS, CALSTRS AND THE
PUBLIC. LET ME START OFF BY
SAYING THAT PUBLIC EMPLOYMENT
EMPLOYEE RETIREMENT, WHICH MEANS
PENSION BENEFITS FOR OUR PUBLIC
EMPLOYEES THROUGHOUT THE STATE,
IS IMPORTANT FOR MANY REASONS. I
CAN GO ON AND ON ABOUT THESE
REASONS, BUT IN THE INTEREST OF
TIME, I'LL PROVIDE SEVERAL OF
THEM FOR CONTENT. FIRST, A
PENSION PROVIDES FINANCIAL
SECURITY FOR RETIREES LIKE
MYSELF, PUBLIC EMPLOYEES WORK,
EARN AN INCOME FOR THEIR THAT
WORK AND PAY CONTRIBUTIONS
TOWARDS THEIR PENSION. THEIR
EMPLOYERS ALSO PAY
CONTRIBUTIONS. THESE
CONTRIBUTIONS ARE THEN INVESTED
BY CALPERS AND CALSTRS, SO THAT
THE PROMISE OF A PENSION,
MEANING GUARANTEED INCOME IN
RETIREMENT, EXISTS WHEN THE
EMPLOYEE RETIRES. SECOND,
BECAUSE A PENSION PROVIDES
GUARANTEED INCOME IN RETIREMENT,
IT HELPS TO ENSURE THAT RETIREES
ARE LESS DEPENDENT ON SOCIAL
PROGRAMS AND SERVICES FOR
CALIFORNIANS WHO ARE MOST IN
NEED, A RETIRED PERSON SYSTEM, A
RETIRED PENSION SYSTEM MEMBER IS
LESS LIKELY TO DEPEND ON THESE
PROGRAMS. THIRD, RETIREES WHO
RECEIVE A PENSION SUPPORT FROM
STATE AND LOCAL ECONOMIES BY
BUYING GOODS AND SERVICES WHICH
SUPPORT BUSINESSES, BUSINESSES
AND JOBS. FOURTH, THROUGH THEIR
INVESTMENT OF CONTRIBUTION FROM
PUBLIC EMPLOYERS AND THEIR
EMPLOYEES, CALPERS AND CALSTRS
ALSO SUPPORT STATE, LOCAL,
NATIONAL AND INTERNATIONAL
ECONOMIES, WHICH ALSO SUPPORT
BUSINESSES AND JOBS AS I SAID, I
CAN GO ON AND ON, BUT SINCE WE
HAVE LIMITED TIME, I'LL CONNECT
ON HOW THESE ARE IMPORTANT AND
RELEVANT REGARDING THE SUBJECT
OF TODAY'S HEARING. OUR HEARING
TODAY WILL FOCUS ON THE
FINANCIAL STATUS OF OUR HEALTH
OF THE SYSTEMS, AS WELL AS WHAT
THEY'RE DOING IN THE SPACE OF
CLIMATE INVESTMENT INVESTING.
THE FINANCIAL HEALTH AND THE
INVESTMENT OF THESE SYSTEMS ARE
ABSOLUTELY CRUCIAL COMPONENTS OF
KEEPING THE PENSION PROMISE.
WE'RE GOING TO HEAR FROM THE
ACTUAL EXPERTS WHO ARE DIRECTLY
RESPONSIBLE FOR THE PENSIONS OF
MILLIONS OF PRESENT AND FUTURE
RETIREES WHO ARE RELYING ON
THESE INDIVIDUALS AND OTHERS TO
ADMINISTER THAT PROMISE. SO
WE'RE GOING TO DO A LITTLE
HOUSEKEEPING. I'M NOW GOING TO
BRIEFLY COVER THE STRUCTURE OF
THIS HEARING AND GO OVER SOME
SIMPLE HOUSEKEEPING RULES,
BECAUSE WE HAVE LIMITED TIME
TODAY FOR MEMBERS OF BOTH
COMMITTEES. YOU'LL NOTICE THAT
AMONG YOUR MATERIALS, YOU HAVE A
NOTEPAD AND A PEN. I ASK THAT
YOU HOLD YOUR QUESTIONS OR
COMMENTS UNTIL WE GET TO
COMMITTEE QUESTIONS AND ANSWER
SESSION. AFTER THE PRESENTATION
OF OUR EXPERTS PANELISTS, SO
THAT THEY HAVE AMPLE TIME AND
OPPORTUNITY TO COMPLETE THEIR
PRESENTATIONS. THEY WILL PRESENT
A LOT OF IMPORTANT INFORMATION
AND YOUR QUESTIONS MIGHT BE
ANSWERED DURING THE COURSE OF
THEIR PRESENTATION. IF YOU HAVE
A QUESTION OR COMMENT DURING THE
PRESENTATION, THE NOTEPAD AND
PEN IS THERE FOR YOU TO JOT DOWN
SOMETHING YOU'VE HEARD THAT
YOU'D LIKE TO ASK THE PANELISTS
ABOUT OR MAKE COMMENTS AFTER
THEIR PRESENTATION IS DONE.
DURING THE FIRST PART OF THIS
HEARING, AS REQUIRED BY LAW,
WE'LL HEAR FROM A CALIFORNIA
ACTUARIAL ACTUARIAL ADVISORY
PANEL REPRESENTATIVE REGARDING
THE FINANCIAL STATUS OF PUBLIC
EMPLOYEES. RETIREMENT AT THE END
OF THAT PART OF THE HEARING,
WE'LL HAVE A FEW MINUTES FOR
PUBLIC COMMENT. FOR THOSE WHO
WANT TO MAKE REMARKS. AFTER
THAT, WE'LL START THE SECOND
PART OF THIS HEARING WHERE WE'LL
HEAR FROM CALPERS AND CALSTRS
REPRESENTING LIVES, WHO WILL
DISCUSS THEIR EMERGING CLIMATE
INVESTMENT INITIATIVES.
FOLLOWING QUESTION AND ANSWERS
FROM THE COMMITTEE MEMBERS AFTER
THEIR PRESENTATION, WILL ALSO
HAVE A FEW MINUTES FOR PUBLIC
COMMENTS ON THESE TOPICS OF THE
HEARING. AS TO THE SECOND PART
OF THIS HEARING, WE RECOGNIZE
THAT EMERGING CLIMATE INVESTMENT
AND CLIMATE CHANGE ARE RELATED
SUBJECTS. BECAUSE SENATOR
GONZALES IS AN ACTIVE VOICE
REGARDING CLIMATE CHANGE AND
PENSION SYSTEM INVESTMENTS, WE
HAVE INVITED THE SENATOR TO
SPEAK AT THE PRESENTATION TABLE
FOR 5 TO 7 MINUTES. AT THE
BEGINNING OF THE PUBLIC COMMENT
PERIOD. DURING THE SECOND PART
OF THE HEARING, AND SHE MAY BE A
LITTLE LATE BECAUSE SHE'S ALSO
IN ANOTHER COMMITTEE. SO WE'RE
GOING TO ALLOW HER TIME WHEN SHE
ENTERS THE ROOM. AFTER THAT,
WE'LL HEAR FROM FIREFIGHTER
CLASSIFIED SCHOOL EMPLOYEE
REPRESENTATIVES AND PRIVATE
SECTOR EMPLOYEES FOR A TOTAL OF
5 TO 7 MINUTES AS THEIR
PERSPECTIVES. AFTER THAT, WE
WILL HAVE TEN MINUTES TO HEAR
COMMENTS FROM THE GENERAL PUBLIC
REGARDING THE PUBLIC COMMENTS
DURING THE PART OF THIS HEARING.
I WANT TO MAKE IT CRYSTAL CLEAR
THAT WE ARE NOT HERE TO
SPECIFICALLY DISCUSS SENATOR
GONZALEZ'S LEGISLATION REGARDING
CALPERS, CALSTRS AND INVESTMENTS
WHATSOEVER. THIS BILL IS NOT ON
THE AGENDA FOR TODAY'S HEARING,
AND NO ONE SHOULD USE THIS
HEARING AS AN OPPORTUNITY K¾T TO
SPECIFICALLY ADVOCATE OR DISCUSS
THAT BILL. INTERESTED,
INTERESTED PARTIES WILL HAVE AN
OPPORTUNITY TO SPECIFICALLY
ADVOCATE REGARDING THAT BILL
WITHIN THE WITHIN THE NEXT
MONTH. SO I'M GOING TO CAUTION
EVERYONE, IF YOU PROCEED TO MAKE
SPECIFIC REMARKS ABOUT THAT
BILL, WE WILL PROCEED TO THE
NEXT SPEAKER. IF YOU'RE UNABLE
TO MAKE PUBLIC COMMENTS DURING
THIS HEARING, YOU MAY SUBMIT
WRITTEN COMMENTS TO BOTH
COMMITTEES. I UNDERSTAND AND
APPRECIATE THAT A LOT OF FOLKS
ARE PASSIONATE ABOUT THE
SUBJECTS OF THIS HEARING.
HOWEVER REGARDING DISRUPTIONS
DURING THIS HEARING, THE
ASSEMBLY AND SENATE HAVE
EXPERIENCED A NUMBER OF
DISRUPTIONS DURING COMMITTEE AND
FLOOR PROCEEDINGS IN THE LAST
FEW YEARS SO THAT IT'S CRYSTAL
CLEAR TO EVERYONE. CONDUCT THAT
DISRUPTS, DISTURBS, OR IMPEDES
THE ORDERLY CONDUCT OF THIS
HEARING IS STRICTLY PROHIBIT,
AND TO ADDRESS ANY DISRUPTIVE
CONDUCT, I WILL DIRECT THE
INDIVIDUAL TO STOP AND WARN THEM
IF THE DISRUPTION CONTINUES,
THEY MAY BE REMOVED FROM
PARTICIPATING IN THIS HEARING OR
THE CAPITOL. IF DISRUPTIONS
CONTINUE, WE MAY TEMPORARILY
RECESS OR SIMPLY ADJOURN THE
MEETING. THE HEARING. THANK YOU
IN ADVANCE FOR YOUR COOPERATION.
NOW, I'D LIKE TO TURN IT OVER TO
MY CO-CHAIR, SENATOR SMALLWOOD.
CUEVAS WHO? CHAIR OF THE SENATE
LABOR, PUBLIC EMPLOYMENT,
RETIREMENT COMMITTEE, FOR
OPENING REMARKS. THANK YOU,
SENATOR, AND THANK YOU, ASSEMBLY
MEMBER MCKENNA, FOR THOSE
INSTRUCTIONS AND SETTING THE
TONE FOR THE IMPORTANCE OF
TODAY. I'M HONORED TO BE HERE,
AND I WELCOME ALL OF THE
PARTICIPANTS TO THIS IMPORTANT
HEARING, WHERE WE WILL LEARN
ABOUT THE PEOPLE'S INVESTMENTS
THROUGH OUR PENSION SYSTEM. AND
I WANT TO SAY, AS A COMMUNITY
ACTIVIST WHO HAS WORKED IN
WORKER RIGHTS FOR MANY YEARS,
THERE ARE FAR TOO MANY PEOPLE
TALKING ABOUT PENSIONS FOR THE
PURPOSES OF DISMANTLING THEM.
BUT I KNOW FIRSTHAND THE VALUE
OF A PENSION AND WHY THESE KINDS
OF CONVERSATIONS ARE IMPORTANT.
IT'S ABOUT PROTECTING OUR
COMMUNITIES, BUT IT'S ALSO ABOUT
INVESTING IN OUR COMMUNITIES.
AND I'M PROUD TO SAY THAT MANY
OF OUR PENSION FUNDS ARE MAKING
STRONG INVESTMENTS IN PLACES
LIKE SOUTH CENTRAL LOS ANGELES.
AND SO FOR ME, THIS HEARING IS
PARTICULARLY SPECIAL AND
IMPORTANT, I ALSO LOOK FORWARD
TO THE PRESENTATION TODAY, AND
PARTICULARLY THE ACTUARIAL
ESTIMATES OR ASSUMPTIONS THAT
ARE GOING TO BE SHARED WITH US
SO THAT WE CAN ENSURE THAT THERE
IS FINANCIAL INTEGRITY IN OUR
SYSTEM AND THAT WE ARE INVESTING
IN CALIFORNIA IN A WAY THAT WILL
MAKE A DIFFERENCE IN THE LIVES
OF WORKERS, PARTICULARLY PUBLIC
SECTOR WORKERS. BUT FOR ALL OF
OUR COMMUNITIES, I, I UNDERSTAND
THAT THESE TWO LARGEST FUNDS
WILL LAY OUT ELEMENTS OF THEIR
WORK. THEY WILL FOCUS ON
SUSTAINABLE INVESTMENTS. AND
THAT'S SOMETHING THAT WE'RE VERY
EXCITED TO HEAR ABOUT. BOTH
PROVIDE THE INVESTMENT RETURNS
NECESSARY TO FULFILL OUR PROMISE
TO PROVIDE RETIREMENT SECURITY,
BUT ALSO MAKE SURE THAT OUR
DEDICATED PUBLIC EMPLOYEES ARE
ABLE TO ENSURE, INVESTMENTS AND
WEALTH FOR NEXT GENERATIONS. AND
THAT WILL DO A LOT TO ADDRESS,
NOT JUST OUR ENVIRONMENTAL
CLIMATE CHANGE, BUT ALSO OUR
ECONOMIC CLIMATE CHANGE THAT WE
ALL WANT AND WISH FOR IN THE
STATE OF CALIFORNIA FOR FAMILIES
TO DO BETTER THAN THE GENERATION
BEFORE THEM. I UNDERSTAND THAT
THERE ARE MANY INVESTMENT
OPPORTUNITIES AND SECTORS THAT
ARE MAKING MEANINGFUL CHANGE TO
TRANSITION THE WORLD TO A GREEN
ECONOMY. IT'S JUST IN THE NEW
YORK TIMES HOW THERE IS A TREATY
AGREEMENT THAT IS IN PLACE,
BEING PUT IN PLACE TO CONTINUE
TO HOLD OUR WORLD GOVERNMENTS
ACCOUNTABLE TO CLIMATE CHANGE.
AND HERE IN CALIFORNIA, WE ARE
MAKING SURE THAT WE ARE MAKING
MEANINGFUL, MEANINGFUL CHANGE
THROUGH OUR PENSION PROGRAMS.
AND I SUPPORT THE FUND'S EFFORTS
IN DEVELOPING AND INVESTING IN
THOSE POSITIVE CHANGES. I DO
THINK THAT WE HAVE OLDER
INDUSTRIES THAT WE HAVE TO MOVE
AWAY FROM, AND CALIFORNIA HAS
COMMITTED TO DOING THAT, WE KNOW
THAT THERE ARE WORKERS IN THOSE
INDUSTRIES AS WELL, AND WE WANT
TO MAKE SURE WE DO THIS IN A WAY
THAT RESPECTS ALL WORKERS. BUT
WE HAVE TO DELIVER ON A CLIMATE
RESILIENT ECONOMY FOR OUR FUTURE
AND FOR CALIFORNIA. I ALSO HOPE
TO HEAR HOW THE FUNDS WILL
ENSURE THAT THEIR INVESTMENTS
AND THEIR INITIATIVES SUPPORT
HIGH ROAD JOBS AND SUPPORT
SKILLED AND TRAINED EMPLOYEES.
AS WE KNOW THAT PUBLIC EMPLOYEES
WHO ARE UNIONIZED AND HAVE
FOUGHT FOR HIGH WAGES AND
BENEFITS, THEY'RE INVESTING INTO
A SYSTEM. WE WANT THAT SYSTEM TO
ALSO SUPPORT OTHER WORKERS
HAVING HIGH WAGES AND DIGNITY ON
THE JOB AND RESPECT AND ABLE TO
INVEST IN THEIR FUTURES AS WELL.
AND FINALLY, I WANT TO BE CLEAR
THAT WE NEED TO HEAR THAT THE
PENSION SYSTEM SUPPORT
INVESTMENTS THAT PROVIDES
OPPORTUNITIES FOR ALL
COMMUNITIES THAT HAVE FAR TOO
LONG BEEN SKIPPED OVER AND HAVE
BEEN DISINVESTED IN REPRESENTING
SOUTH CENTRAL LOS ANGELES. WE
LIVE AND SEE IT EVERY DAY AS THE
INDUSTRIAL HAS SHIFTED INTO A
SERVICE ECONOMY THAT HAS FAR TOO
MANY FAMILIES STRUGGLING. WE
NEED TO INVEST IN THESE
COMMUNITIES, AND THAT'S WHAT
MANY OF THESE FUNDS ARE DOING.
WE NEED CAPITAL TO GO TO THESE
COMMUNITIES WHO HAVE DONE SO
MUCH WITH SO LITTLE, AND WHO ARE
DISPROPORTION IMPACTED BY
CLIMATE CHANGE. IF WE WANT TO
IMAGINE CHANGE, WE HAVE TO START
WITH THESE COMMUNITIES. AND SO I
LOOK FORWARD TO THE CONVERSATION
TODAY. I LOOK FORWARD TO THE
QUESTIONS. I LOOK FORWARD TO US
CONDUCTING OURSELVES WITH
DIGNITY AND RESPECT SO THAT WE
CAN GET THE INFORMATION THAT WE
NEED TO ENSURE THAT WE HAVE A
PENSION SYSTEM THAT IS BUILDING
THE FUTURE THAT ALL CALIFORNIANS
DESERVE. SO THANK YOU VERY MUCH,
CHAIRWOMAN, FOR YOUR WORDS AND
FOR THIS OPPORTUNITY TO SPEAK.
THANK YOU, MADAM CHAIR. ALL
RIGHT. LET'S GET STARTED WITH
THE FIRST PART OF THIS HEARING.
WE HAVE DAVID LAMOREAUX. I HOPE
I SAID IT RIGHT, DEPUTY CHIEF
ACTUARY OF CALSTRS, ON BEHALF OF
THE CALIFORNIA ACTUARY ADVISORY
PANEL. WELCOME, DAVID. THANK YOU
FOR BEING HERE TODAY, YOU HAVE
ABOUT 15 MINUTES. AND WHEN YOU
GET TO ABOUT TEN MINUTES, I WILL
GIVE YOU A NOD IF YOU NEED IT.
THAT MUCH TIME. THANK YOU. THANK
YOU VERY MUCH. GOOD MORNING
EVERYONE. I'M DAVID LAMOREAUX,
AGAIN, I'M THE DEPUTY SYSTEM
ACTUARY AT CALSTRS. BUT I'M HERE
TODAY AS A REPRESENTATIVE OF THE
CALIFORNIA ACTUARIAL ADVISORY
PANEL. AND JUST TO MAKE IT
EASIER ON EVERYONE, WE CALL IT
THE CAP. MUCH EASIER TO SAY SO.
AND YOU SHOULD HAVE BEEN
PROVIDED WITH A HANDOUT THAT IF
YOU WANT TO FOLLOW ALONG, AS I
GO WITH MY REMARKS, AS SHOWN ON
PAGE TWO, THE CAP WAS CREATED IN
2008. IT IS AN EIGHT MEMBER
PANEL. WE ARE A HOUSE IN THE
STATE COMPTROLLER'S OFFICE, AND
IT WAS CREATED TO PROVIDE
IMPARTIAL AND INDEPENDENT
INFORMATION ON PENSION FUND AND
BEST PRACTICES. AND OVER THE
YEARS WE'VE ACTUALLY HAVE ISSUED
THE CAP HAS ISSUED SEVERAL
GUIDANCE DOCUMENTS THAT CAN BE
FOUND ON OUR WEBSITE. I'VE
PROVIDED A LINK ON THE HANDOUT
AND SOME OF THOSE GUIDANCE
DOCUMENTS, TALK ABOUT MODEL
FUNDING PRACTICES. SO WE'VE AND
THIS IS FOR CALIFORNIA. SO WE'VE
ISSUED DOCUMENTS TO PROVIDE
GUIDANCE TO ACTUARIES IN
CALIFORNIA ON WHEN PERFORMING
ACTUAL WORK. NOW EACH MEMBER OF
THE PANEL AS SHOWN ON PAGE
THREE, IS APPOINTED BY AN
ENTITY. I'M APPOINTED BY CALSTRS
. CALPERS APPOINTS ONE MEMBER.
TWO MEMBERS ARE APPOINTED BY THE
GOVERNOR, ONE BY THE SPEAKER OF
THE ASSEMBLY, ONE BY THE SENATE
COMMITTEE ON RULES, ONE BY THE
èC SYSTEM, AND ONE BY THE STATE
ASSOCIATION OF COUNTY RETIREMENT
SYSTEMS. NOW, THE MAIN REASON
I'M HERE TODAY IS BECAUSE OF
GOVERNMENT CODE 20229. SO THIS
IS A CODE THAT WAS ADDED IN
STATUTE ALMOST 15 YEARS AGO,
BACK IN 2010. THAT REQUIRES A
CALPERS ANNUALLY TO PROVIDE
CERTAIN INFORMATION RELATED TO
THE PENSION COSTS OF STATE
EMPLOYEES, SPECIFICALLY, IT
REQUIRES THAT CALPERS PROVIDES
BOTH LIABILITIES AND
CONTRIBUTION RATE INFORMATION
USING AN INVESTMENT RETURN
ASSUMPTION THAT IS 2% LOWER AND
2% HIGHER THAN WHAT THEY ASSUME.
IT ALSO REQUIRES THAT CALPERS
PROVIDES CONTRIBUTION RATE
INFORMATION BY AMORTIZING OR
PAYING DOWN THEIR UNFUNDED
LIABILITY OVER A TIME PERIOD
THAT IS CALLED THE AVERAGE
REMAINING SERVICE PERIOD. SO IF
YOU LOOK AT THE AVERAGE EMPLOYEE
FOR THE STATE, HOW MANY YEARS DO
THEY HAVE LEFT TO WORK? THAT
PERIOD IS WHAT THE LAW REQUIRES
CALPERS TO USE WHEN AMORTIZING
THE UNFUNDED LIABILITY. NOW, THE
GOVERNMENT CODE 20229 ALSO
REQUIRES ONE PERSON, A MEMBER OF
THE CAP MYSELF TODAY TO COME IN
FRONT OF YOU TO TALK ABOUT A FEW
THINGS, TO EXPLAIN THE ROLE OF
THE INVESTMENT RETURN ASSUMPTION
IN THE FUNDING OF PENSION
BENEFITS, TO DESCRIBE THE
CONSEQUENCES TO STATE'S BUDGET.
IF CALPERS WERE TO EARN LESS OR
MORE THAN THEIR INVESTMENT, THAN
THEIR ASSUMED INVESTMENT RETURN,
AND TO ALSO REPORT WHETHER OR
NOT THE CALPERS AMORTIZE PERIOD
EXCEEDS WHAT I MENTIONED BEFORE
THE AVERAGE REMAINING SERVICE
PERIOD. SO IF YOU LOOK AT THE
INVESTMENT RETURN ASSUMPTION,
THIS IS PROBABLY THE MOST
IMPORTANT ASSUMPTION USED BY ALL
PENSION FUNDS WHEN YOU'RE
FUNDING PENSION BENEFITS. LIKE
IF YOU LOOK AT BOTH, IF YOU LOOK
AT US AT CALSTRS, LIKE TODAY,
FOR EVERY DOLLAR OF BENEFIT THAT
WE PAY, BETWEEN 60 TO $0.65
COMES FROM INVESTMENT INCOME. SO
THAT'S WHY. AND THE INVESTMENT
RETURN ASSUMPTION IS SO
IMPORTANT. IT'S WHAT GENERATES
THE IT'S WHAT PROVIDES THE MOST
FUNDING FOR PENSION BENEFITS. SO
WHEN IT COMES TO CALPERS, THEIR
CURRENT ASSUMPTION IS 6.8. SO
THEY ASSUME THAT OVER TIME THEY
WILL EARN ON AVERAGE 6.8. NOW
THEY'RE NEVER GOING TO EARN
EXACTLY THIS AMOUNT ON ANY GIVEN
YEAR. BUT THE GOAL IS FOR ALL
PENSION SYSTEM WHEN YOU MAKE
THIS ASSUMPTION IS TO IS TO EARN
THIS NUMBER OVER A LONG PERIOD
OF TIME. SO WHAT IT MEANS FOR
CALPERS IN A YEAR WHERE THEY
EARN LESS THAN 6.8, IT'S WHAT WE
CALL AN INVESTMENT LOSS OR AN
ACTUAL LOSS THAT THEN
POTENTIALLY REQUIRES A HIGHER
CONTRIBUTION TO MAKE IT UP, AND
VICE VERSA. IN THE YEAR WHERE
CALPERS EARNS MORE THAN 8, YOU
HAVE A GAIN THAT THEN COULD BE
USED TO LOWER CONTRIBUTIONS. SO
THAT'S HOW PENSION FUNDS ARE
FUNDED. AND JUST TO PUT IT IN
PERSPECTIVE, IF YOU LOOK IN
CALIFORNIA, OF ALL OF THE MAJOR
RETIREMENT SYSTEMS IN
CALIFORNIA, BECAUSE BESIDES
CALPERS AND CALSTRS, YOU HAVE
SEVERAL COUNTY RETIREMENT
SYSTEMS AND MOST SYSTEMS IN
CALIFORNIA ASSUME HAVE AN
INVESTMENT RETURN ASSUMPTION
THAT RANGES BETWEEN 6.75 AND 7.
SO AT 6.8, CALPERS IS RIGHT IN
THE RANGE OF WHAT EVERYONE IS
USING IN CALIFORNIA WHEN IT
COMES TO THE AMORTIZATION
PERIOD. SO WHAT WE'RE TALKING
ABOUT HERE IS IF YOU HAVE AN
UNFUNDED LIABILITY. SO IF THE
LIABILITIES OF THE SYSTEM ARE
GREATER THAN THE ASSETS IS WHAT
WE CALL AN UNFUNDED LIABILITY,
MOST BOARDS OR RETIREMENT SYSTEM
WILL THEN HAVE TO SELECT AN
AMORTIZATION PERIOD OVER HOW
MANY YEARS ARE WE GOING TO TRY
TO REACH FOR FUNDING AND PAY
DOWN THAT UNFUNDED LIABILITY? AT
CALPERS, THEIR BOARD HAS ADOPTED
A POLICY THAT NEW UNFUNDED
LIABILITY, FOR EXAMPLE, CREATED
FROM AN INVESTMENT LOSS, WOULD
BE PAID OVER A 20 YEAR PERIOD.
EARLIER, I TALKED ABOUT THE CAP,
SOME OF THE GUIDANCE DOCUMENT
THAT WE ISSUED, WE HAVE STATED
IN THAT DOCUMENT THAT USING A 15
TO 20 YEAR PERIOD IS MODEL
PRACTICE. AND IF YOU LOOK ACROSS
THE UNITED STATES, THERE ARE
ALSO SOME GUIDANCE DOCUMENT
PROVIDED BY, NATIONAL ACTUAL
ORGANIZATIONS. AND 15 TO 20
YEARS IS VIEWED AS A MODEL
FUNDING PRACTICE. SO CALPERS
USES A 20 YEAR AMORTIZATION
PERIOD. SO FOR THEM, THEIR GOAL
IS TO TRY TO REACH TO BE FULLY
FUNDED OVER A 20 YEAR PERIOD.
NOW, WHAT THAT MEANS IS, IF YOU
PUT IT IN A CONTEXT, FOR EXAMPLE
, AS AN INDIVIDUAL TRYING TO GET
A MORTGAGE, IT'S THE SAME IDEA
WHEN IT COMES TO AN AMORTIZATION
PERIOD. IF YOU SELECT A SHORTER
AMORTIZATION PERIOD, YOU WILL
END UP WITH HIGHER PAYMENTS IN
THE SHORT TERM. BUT LOWER COST
LONG TERM. JUST LIKE IF YOU PICK
A 15 YEAR MORTGAGE VERSUS A 30
YEAR MORTGAGE, YOU HAVE HIGHER
MONTHLY PAYMENTS WITH A 15 YEAR
MORTGAGE. BUT YOU PAY LESS
INTEREST OVER THE LONG TERM. SO
THAT'S THE SAME PRINCIPLE WHEN
IT COMES TO AN AMORTIZATION
PERIOD FOR PENSION FUND. SO 20
YEARS FOR CALPERS IS WITHIN WHAT
WE VIEW AT THE CAP AS MODEL
PRACTICE. NOW THE SECTION 202 TO
9 ASKED ME TO COME HERE AND TELL
YOU WHETHER OR NOT THE
AMORTIZATION PERIOD USED BY
CALPERS, THE 20 YEAR DIMENSION
EXCEEDS WHAT WE CALL THE AVERAGE
REMAINING SERVICE PERIOD FOR
STATE EMPLOYEES. NOW THE STATE
EMPLOYEES FOR CALPERS, THEY HAVE
THERE ARE FIVE SEPARATE PENSION
PLANS FOR THE STATE EMPLOYEES.
AT CALPERS. THEY ARE CALLED THE
STATE MISCELLANEOUS, WHICH
COVERS MOST OF THE OFFICE
WORKERS LIKE MYSELF, THE STATE
INDUSTRIAL, STATE SAFETY, STATE
PEACE OFFICER AND FIREFIGHTER
AND CALIFORNIA HIGHWAY PATROL.
AND FOR ALL OF THOSE PLANS, THE
AVERAGE REMAINING SERVICE PERIOD
IS ABOUT 11 OR 12 YEARS. SO THAT
MEANS THAT CALPERS DOES, IN FACT
USE A LONGER PERIOD THAN THE
AVERAGE SERVICE PERIOD. BUT
AGAIN, AT IT, YOU WILL RARELY
SEE PENSION FUNDS IN THE UNITED
STATES THAT USE AN AMORTIZATION
PERIOD AS LOW AS TEN, 11 OR 12
YEARS. THE MAIN THING TO
CONSIDER HERE IS, AS I MENTIONED
, INVESTMENT RETURN ASSUMPTION
IS THE MOST IMPORTANT ASSUMPTION
WHEN YOU FUND PENSION BENEFIT.
BUT IT'S ALSO THE MOST VOLATILE
ON ANY GIVEN YEAR, LIKE IF YOU
LOOK AT US AT CALSTRS A FEW
YEARS AGO, WE EARNED 27% IN ONE
YEAR. THE FOLLOWING YEAR OUR
RETURN WAS NEGATIVE. SO MASSIVE
SHIFT. BUT OVER THAT TWO YEAR
PERIOD, WE MORE THAN EXCEEDED
WHAT WE ASSUME. SO IF YOU HAVE
TWO SHORT AND AMORTIZATION
PERIOD WHEN YOU TRY TO REACT TO
THESE MARKET SWINGS, IT MAY
TRANSLATE INTO CONTRIBUTION RATE
VOLATILITY. SO THAT'S WHY
SOMETIMES ACTUARIES RECOMMEND 15
TO 20 YEARS AS AN ACCEPTABLE
PERIOD BECAUSE IT'S A GOOD TRADE
OFF BETWEEN NOT HAVING TOO LONG
A PERIOD, BUT ALSO KEEPING
CONTRIBUTION RATES A BIT MORE
STABLE. SO THAT'S WHY 15 TO 20
YEARS IS VIEWED AS MODEL
PRACTICE. AND THE LAST THING I
WANT TO MENTION. SO GOVERNMENT
20229 THE CODE REQUIRES CALPERS
TO DISCLOSE A LOT OF
INFORMATION. SO I WAS NOT
PLANNING TO GO TO THIS
INFORMATION TODAY. I JUST WANT
TO HIGHLIGHT TO YOU THAT, SINCE
THAT REQUIREMENT HAS BEEN IN
STATUTE, CALPERS HAS MADE IT
EVERY YEAR. THEY HAVE DISCLOSED
THIS INFORMATION EACH YEAR IN
THEIR ANNUAL ACTUAL VALUATION
REPORT. THE REPORT IS AVAILABLE
ON THE CALPERS WEBSITE. ON THE
LAST PAGE OF MY HANDOUT, I'VE
PROVIDED A LINK THERE AND TO
SHOW YOU HOW MUCH INFORMATION IS
REQUIRED TO BE DISCLOSED BY THIS
SECTION CODE, CALPERS PROVIDES
INFORMATION OVER TEN PAGES IN
THEIR REPORT. SO YOU HAVE TEN
PAGES OF INFORMATION SHOWING,
CHARTS AND NUMBERS RELATED TO
LIABILITY AND COST INFORMATION
USING DIFFERENT INVESTMENT
RETURN ASSUMPTION AND DIFFERENT
AMORTIZATION PERIOD. SO WITH
THIS, IT COMPLETES MY REMARKS,
AND I WOULD BE HAPPY TO ANSWER
ANY QUESTIONS YOU MAY HAVE ABOUT
ACTUAL PRACTICE IN GENERAL
FUNDING PRACTICE CALSTRS CALPERS
. THANK YOU DAVID. THANK YOU SO
MUCH. WE'LL BRING IT BACK TO THE
COMMITTEE. DO YOU HAVE ANY
QUESTIONS? NO, SENATOR, THANK
YOU, MADAM CHAIR, SO I HAVE A
QUESTION. AND THIS IS NOT THE
QUESTION THAT WAS PREPARED. I
HAVE A QUESTION OF WHAT YOU JUST
PRESENTED. IN THE STATE OF
CALIFORNIA, WE'RE RECOGNIZING WE
HAVE A BOOM BUST ECONOMY. AND,
THIS IS MY GOING INTO MY SECOND
YEAR, BUT WE HAVE ESTABLISHED
RAINY DAY FUNDS. WE HAVE
ESTABLISHED WAYS OF TRYING TO
MITIGATE THIS SHIFT IN SWING IN
OUR ECONOMY. SO WHEN YOU WHEN
YOU SAY THE EXAMPLE THAT YOU
GAVE OF THE 27, YOU KNOW,
VOLATILE K¾T AND THEN, YOU KNOW,
A DECLINE, HOW DOES A PENSION
WHETHER THAT DO YOU HAVE
STRATEGIES THAT ALLOW YOU TO
MAXIMIZE THOSE KINDS OF PEAKS
AND THEN TO SORT OF WEATHER THE
LOWS? YES. SO WHAT IS COMMON
PRACTICE IN IN COMMON ACTUAL
PRACTICE, BOTH IN CALIFORNIA AND
ACROSS THE US, ACTUARIES OVER
THE YEARS HAVE. SO WHAT ACTUALLY
IS GENERALLY DO IT'S CALL IT'S
AN ACTUAL TERM. IT'S CALLED
ASSET SMOOTHING. IT'S LIKE A
RAINY DAY FUND. SO IN A YEAR
WHEN YOU HAVE GOOD RETURN, FOR
EXAMPLE, FOR US AT CALSTRS, OUR
BOARD HAS ADOPTED A POLICY WHERE
WE ONLY RECOGNIZE, FOR EXAMPLE,
A THIRD OF THE INVESTMENT GAIN.
AND WE PUT THE OTHER TWO. THIRD,
IF YOU WANT IN A RAINY DAY FUND
TO BE USED THE NEXT TWO YEARS IN
CASE IT GOES THE OTHER WAY. SO
MOST PENSION SYSTEM, I WOULD SAY
USE BETWEEN THE 3 TO 5 YEAR, IF
YOU WANT A SMOOTHING PERIOD IN
ORDER TO, IN ORDER TO SMOOTH
THOSE EVENT. AND CALPERS USES A
FIVE YEAR PERIOD AT CALSTRS, WE
USE THREE, THREE TO 3 TO 5 IS
THE MOST COMMON PERIOD USE.
YOU'RE WELCOME, THANK YOU, MADAM
CHAIR, DAVID, CAN YOU BREAK DOWN
FOR US WHAT? UNFUNDED AND
UNDERFUNDED LIABILITIES MEAN AND
HOW THIS AFFECTS THE SYSTEM?
ALSO, CAN YOU DESCRIBE FOR US
THE ROLE THAT INVESTMENTS PLAY
IN THE FINANCIAL HEALTH OF A
PENSION SYSTEM? AND WHEN
CONSIDERING CHANGES IN MORTALITY
ASSUMPTIONS AND SYSTEM MATURITY?
YES. SO IF YOU THINK ABOUT
FUNDING A PENSION BENEFIT,
YOU'VE JUST HIRED AN EMPLOYEE
TODAY THAT EMPLOYEE IS 25 YEARS
OLD AND YOU'RE GUARANTEEING THEM
A BENEFIT WHEN THEY RETIRE. AND
LET'S SAY THEY'RE GOING TO
RETIRE IN 40 YEARS AT AGE 65.
IT'S A LONG TIME PERIOD. SO AS
ACTUARIES, WE HAVE TO MAKE
SEVERAL ASSUMPTIONS, INVESTMENT
RETURN, HOW LONG THEY'RE GOING
TO LIVE, WHEN ARE THEY GOING TO
RETIRE? AND THESE ASSUMPTIONS
ARE MEANT TO BE LONG TERM. BUT
WE ALSO KNOW THAT ON ANY GIVEN
YEAR, ESPECIALLY THE INVESTMENT
RETURN, YOU MIGHT EITHER EARN
LESS OR MORE THAN WHAT YOU
ASSUME. AND WHEN THOSE EVENTS
OCCUR, YOU MIGHT END UP EITHER
AHEAD OF SCHEDULE OR A BIT BELOW
SCHEDULE IN YOUR GOAL TO FUND
THAT BENEFIT. SO BEING
UNDERFUNDED OR HAVING AN
UNFUNDED LIABILITY SIMPLY MEANS
YOU'VE FALLEN BELOW SCHEDULE.
AND NOW YOU NEED TO RAISE
CONTRIBUTION RATES TO GO BACK ON
SCHEDULE. SO WHEN YOU HEAR A
PLAN IS UNDERFUNDED, THAT MEANS
THAT THE LIABILITIES, WHICH IS
THE ACTUARIES ESTIMATE OF HOW
MUCH MONEY YOU SHOULD HAVE IN
THE FUND TODAY TO BE ABLE TO
COVER THE BENEFITS THAT HAVE
BEEN ACCRUED, YOU COMPARE THAT
TO THE ASSETS. AND IF THE ASSETS
ARE LESS, YOU HAVE AN UNFUNDED
LIABILITY. SO THAT'S SO IF YOU
LOOK FOR US AT CALSTRS RIGHT NOW
WE JUST REPORTED WE'RE ABOUT 76%
FUNDED, SO THAT'S WHAT AN
UNFUNDED LIABILITY IS. SO IT'S A
REFLECTION OF ALL THE ACTUARIAL
ASSUMPTIONS THAT GO INTO THE
CALCULATION AND WHETHER YOU'VE
MET THEM OR NOT. WHAT IS YOUR
IDEAL, FUND? YOU SAID WE'RE AT
76% FUNDED. WHAT WOULD BE YOUR
IDEAL PERCENTAGE FOR US TO BE
FUNDED? IN A PERFECT WORLD, YOU
WOULD BE 100% FUNDED, BUT BUT
WHAT IS MOST IMPORTANT? SO
THAT'S WHY I TELL PEOPLE NEVER
LOOK AT A SPECIFIC FUNDED STATUS
AT THE POINT IN TIME. WHAT YOU
REALLY HAVE TO LOOK AT IS, DOES
THE SYSTEM HAVE A PLAN IN PLACE
TO REACH FULL FUNDING? SO YOU
HAVE TO LOOK AHEAD TO SEE IS THE
PLAN MAKING MEANINGFUL PROGRESS
TO ELIMINATE THE UNFUNDED
LIABILITY? BECAUSE YOU MAY HAVE
A PLAN THAT'S 80% FUNDED, BUT IF
THEY'RE NOT PAYING ENOUGH, MAYBE
THAT FUNDED STATUS IS PROJECTED
TO GO DOWN. SO SO THAT WOULD BE
MY RECOMMENDATION WOULD BE TO
LOOK AHEAD TO SEE IS THE PLAN
MAKING ADDITIONAL CONTRIBUTION
TO REACH FULL FUNDING. AND ONE
LAST QUESTION FOR ME, HOW IS THE
FUNDING PLAN AFFECTED WHEN, THE
ASSUMED RATE OF RETURN OR ON
INVESTMENT IS NOT ACHIEVED AND
ALSO WHEN INVESTMENT? I THINK
YOU PROBABLY ANSWERED THAT, BUT
WITH, SENATOR CUEVAS ACTUALLY
ABOUT THE RAINY DAY FUND. SO I
THINK YOU'VE ANSWERED THAT. BUT
SO ONE LAST QUESTION, THOUGH,
AND FROM MY HEAD, WHEN A PERSON
LIKE PROMOTES UP LIKE THEY'RE
WORKING ON A JOB FOR 40 YEARS,
THEY PROMOTE UP, THEY START
PAYING IN MORE MONEY. DOES THAT
ALSO HELP WITH THE FUNDING?
BECAUSE AS YOU PROMOTE, DO YOU
DOES YOUR DOES YOUR,
CONTRIBUTION INCREASE. SO NOT
THE CONTRIBUTION RATE. SO MOST
EMPLOYEES CONTRIBUTE AS A
PERCENTAGE OF THEIR SALARY. SO
AS YOU GET PAY INCREASES YOU DO
CONTRIBUTE MORE. BUT GENERALLY I
WOULD WE CONSIDER THAT A, THAT'S
AN ACTUAL TERM, A COST NEUTRAL
EVENT BECAUSE YOU ALSO GET A
HIGHER BENEFIT BECAUSE THE
BENEFITS ARE BASED ON THE
SALARY. SO WHEN YOU GET A HIGHER
BENEFIT, YOU PAY A HIGHER
SALARY, YOU YOU PAY MORE, BUT
YOU ALSO GET A HIGHER BENEFIT.
THANK YOU. ANY QUESTIONS? I'M
SORRY. YOU YOU YOU MADE ME THINK
OF ANOTHER, QUESTION OR TWO THAT
I HAVE SO WITH THAT, WHAT MIGHT
WE LOOK AT DOWN THE ROAD IN
TERMS OF RISK FOR OUR PENSION,
IN TERMS OF EXPOSURE? WHAT ARE
SOME OF THE THINGS WE NEED TO
THINK ABOUT? YOU KNOW, WE HAVE
THE WAR IN UKRAINE RIGHT NOW,
FOR EXAMPLE, HOW DOES THAT
IMPACT, POTENTIAL RISKS. BUT IT
JUST AS WE THINK ABOUT OUR
BUDGET, THE DEFICIT THAT WE'RE
IN, VACANCIES THAT ARE BEING
PULLED BACK, JOBS, THAT HIRING
FREEZES THAT WE HOPE WILL NEVER
HAPPEN, BUT WE'VE SEEN THAT IN
OTHER TIMES. YOU KNOW WHAT? WHAT
IS THE POTENTIAL RISK THAT WE'RE
FACING AND HOW DO WE ADDRESS
THAT? SO WHEN IT COMES TO RISK,
ESPECIALLY FOR FUNDING PENSION
BENEFITS, IT'S WHAT WHATEVER
FIRST SAY IS EVERY PENSION FUND
IS UNIQUE BECAUSE THEY HAVE
THEIR OWN SET OF MEMBERS
DEMOGRAPHICS. SO FOR US AT
CALSTRS, WE ACTUALLY ISSUE A
REPORT ONCE A YEAR IN NOVEMBER
THAT WE CALL THE REVIEW OF
FUNDING LEVELS AND RISK, WHERE
WE FOCUS ON THE MAIN RISKS THAT
COULD PREVENT US FROM REACHING
FULL FUNDING AND SOME OF THOSE
RISKS, ALTHOUGH THEY MIGHT BE
SLIGHTLY DIFFERENT FROM ONE
SYSTEM TO THE NEXT, THEY ARE ALL
, PROBABLY APPLIED TO ALL OF
THEM. SO INVESTMENT RISK IS
ALWAYS THE NUMBER ONE RISK FOR,
PENSION FUNDING. BECAUSE AS I
SAID BEFORE, SO MUCH OF THE
BENEFIT WHEN THEY'RE PAID OUT
COMES FROM INVESTMENT
PERFORMANCE. SO NOT MEETING YOUR
INVESTMENT RETURN ASSUMPTION
OVER THE LONG TERM IS PROBABLY
THE BIGGEST RISK. BUT FOR US
ALSO AT CALSTRS, WE ALSO MONITOR
WHAT WE CALL LONGEVITY RISK
BECAUSE IT'S A Ã. WE ADMINISTER
DEFINED BENEFIT PROGRAMS WHERE
WE PAY BENEFITS UNTIL A MEMBER
PASSES AWAY OR THEIR BENEFICIARY
PASSES AWAY. SO HOW LONG A
MEMBER LIVES IS ALSO SOMETHING
THAT ACTUARIES HAVE TO PAY
ATTENTION TO. AND THAT'S A VERY
IMPORTANT ASSUMPTION FOR US. WE
ARE BLESSED AT CALSTRS TO HAVE
MEMBERS WHO LIVE A VERY LONG
TIME, IF I KNOW IF YOU'VE HEARD
THE EXPRESSION TEACHERS LIVE
FOREVER. BUT NO, IT IS SHOCKING
SOMETIMES TO SEE, TEACHERS LIVE
ON AVERAGE, 2 TO 3 YEARS LONGER
THAN THE AVERAGE PERSON IN
CALIFORNIA, WHICH IS GREAT. BUT
AS A PENSION FUND, YOU HAVE TO
KEEP AN EYE ON THIS BECAUSE IT
IS ADDITIONAL MONEY YOU HAVE TO
PAY. SO THAT I WOULD SAY
LONGEVITY RISK, INVESTMENT RISK.
AND FOR US ALSO, WE KEEP A LOT
AN EYE ON HOW MANY TEACHERS WE
HAVE IN THE SYSTEM. SO BECAUSE
THAT'S THE MONEY COMING IN THAT
HELPS TO FUND THOSE BENEFITS. SO
THOSE GENERALLY I WOULD SAY ARE
THE RISKS THAT THEY MIGHT HAVE A
SLIGHT DIFFERENT IMPACT
DEPENDING ON THE SYSTEM. BUT
GENERALLY THOSE ARE THE MAIN
RISKS THAT ALL OF THE ACTUARIES
KEEP AN EYE ON WHEN IT COMES TO
FUNDING PENSION BENEFITS. THANK
YOU. THANK YOU, COMMITTEE. I'M
SORRY. WE HAVE ANOTHER, ASSEMBLY
MEMBER. HART. YEAH, JUST THAT
YOUR COMMENT RAISED A QUESTION
IN MY MIND. IS THERE A
DIFFERENCE IN THE NEWER
EMPLOYEES PARTICIPATION IN THE
DEFINED BENEFIT PENSION PLAN
PROGRAMS? ARE YOU NOTICING A
TREND WITH YOUNGER EMPLOYEES
BEING STRESSED FINANCIALLY AND
NOT CONTRIBUTING TO THEIR
PENSION PLANS? IS THAT A FACTOR
IN YOUR LONG TERM PROJECTIONS?
SO NOT CONTRIBUTING? IT'S NOT A
FACTOR BECAUSE IN CALIFORNIA
ONCE, IF YOU WORK FOR A PUBLIC
EMPLOYER THAT PROVIDES A PENSION
BENEFIT. SO EITHER YOU COVER
WHETHER YOU'RE COVERED BY
CALPERS, CALSTRS OR A COUNTY
RETIREMENT SYSTEM, YOU'RE
REQUIRED BY LAW TO PAY US A SET
PERCENTAGE TOWARD YOUR PENSION.
SO THE EMPLOYEES ARE REQUIRED TO
PUT A PERCENTAGE OF THEIR SALARY
AWAY TOWARD THEIR PENSION
BENEFIT. YEAH. I WAS THINKING
THAT, WITH THE CHANGES THAT HAD
OCCURRED, HOW HOW HAS THAT
AFFECTED, THESE LONG TERM
TRENDS, THE PENSION REFORMS THAT
HAPPENED ABOUT TEN YEARS AGO. SO
WHAT WE'RE NOTICING AGAIN, IT'S,
SO YOU CAN SEE ALREADY, IT'S
BEEN IN PLACE SINCE 2014. SO
THERE ARE SO ALL OF THE NEW
EMPLOYEES ARE SUBJECT TO
SLIGHTLY LOWER RETIREMENT
BENEFITS. IT IS STILL TOO EARLY
TO TELL WHAT KIND OF IMPACT IT
HAS ON THE DEMOGRAPHICS, BECAUSE
MOST INDIVIDUALS WORK A GOOD 25
TO 30 YEARS AT THIS MOST
ACTUARIES RIGHT NOW, WE'RE ALL
ANTICIPATING THAT MEMBERS WILL
RETIRE AT A LATER AGE THAN THEY
HAVE HISTORICALLY, SO WE HAVE
YET TO REALLY SEE A SHIFT IN, IN
DEMOGRAPHIC PATTERNS. PROBABLY
IN TEN YEARS, WE'LL BE IN A
BETTER POSITION TO, TO ANSWER.
YES. SO THAT'S THE THING WITH
FUNDING, PENSION BENEFIT, IT'S
LIKE TAKING THE TITANIC ACROSS
THE OCEAN. IT'S A SLOW MOVING
SHIP. SO THAT'S WHY WHEN YOU
HIRE SOMEONE AT 25, YOU WON'T
KNOW FOR 30 YEARS OR 40 YEARS
WHETHER OR NOT YOUR ASSUMPTION
THAT THEY WERE GOING TO RETIRE
AT AGE 60 IS CORRECT OR NOT. SO
THAT'S WHY IT TAKES TIME. AND SO
WE'LL BE IN A BETTER POSITION TO
ANSWER THOSE QUESTIONS.
UNFORTUNATELY, IN ANOTHER TEN
YEARS, PROBABLY A BETTER SHIP.
YES YES, A BETTER SHIP. YES.
SENATOR LAIRD, IF I COULD JUST
ASK A FOLLOW UP QUESTION BECAUSE
PAUSE. EVEN IF IT'S TEN YEARS,
YOU KNOW WHAT? THE SHIP IS
MOVING ON. THOSE PEOPLE THAT
CAME IN IN THE TEN YEARS, AS
OPPOSED TO THOSE PEOPLE THAT
CAME IN IN THE TEN YEARS BEFORE
YOU CAN'T MAKE SOME KIND OF
ASSESSMENT OF WHAT THE CHANGE IS
BETWEEN THOSE TWO. OH, WE DO.
AND SO THEN WHAT IS IT? WHAT IS
IT? SO GENERALLY THE, THE, THE
ASSESSMENT IS THAT MEMBERS WILL
RETIRE AT A LATER AGE, YOU KNOW,
IF YOU PROVIDE SOMEONE A LOWER
RETIREMENT BENEFIT, YOU WOULD
EXPECT THEM THAT IN ORDER TO BE
ABLE TO KEEP THE SAME STANDARD
OF LIVING, AFTER WORKING THAT
THEY'RE GOING TO HAVE TO WORK A
LITTLE BIT LONGER, SO FOR US AT
CARSERVICE, WE HAVE WHEN THE
PENSION REFORM IS REFERRED AS
PEPRA. SO FOR US, WE HAVE TWO
SETS OF BENEFIT. AND WE DO
ASSUME THAT THAT OUR TEACHERS
WILL RETIRE A LITTLE BIT LATER
ON THE NEW RETIREMENT FORMULA.
NOW, WE HAVE SEEN A SLIGHT
INCREASE IN OUR RETIREMENT AGES
AT CALSTRS OVER THE LAST 15
YEARS. USED TO BE CLOSER TO 62.
NOW IT'S CLOSER TO 63. SO YOU
CAN SEE THAT SLOWLY THE PENSION
REFORM IS WORKING. MEMBERS ARE
WORKING A LITTLE BIT LATER AND
GENERALLY FOR A PENSION FUND
WORKING LONGER, RETIRING AT A
LATER AGE MEANS LOWER COST FOR
MEMBERS AND THE EMPLOYERS
BECAUSE THE LONGER YOU WORK
GENERALLY, IT ALLOWS YOU TO SAVE
MORE MONEY TO PAY FOR THE
RETIREMENT BENEFIT. SO THAT WAS
ONE OF THE REASONS FOR THE
PENSION REFORM LEGISLATION WAS
BY LOWERING THE BENEFIT AND
RAISING, IF YOU WANT THE
RETIREMENT AGES, IT DID LOWER,
COSTS FOR ALL RETIREMENT
SYSTEMS. OKAY, THAT BECAUSE I, I
THOUGHT THAT WOULD HAVE BEEN THE
ANSWER TO HIS QUESTION SO THAT
THAT'S WHY I WAS FOLLOWING UP
AND JUST FOR THE RECORD, WE HAVE
A VERY, INTERESTED TWO PARTIES
SITTING OVER HERE AS SOMEBODY
THAT HAS 40 YEARS CREDIT IN THE
PENSION SYSTEM AND IS ENGAGED IN
HE WENT TO MAX OUT IN THE LAW
FIRM IN THE LAW ENFORCEMENT.
WELL, BUT IT IT MAKES THE POINT.
IT MAKES THE POINT. I TURNED ON
MY PENSION AT AGE 69. IF
EVERYBODY HAD WAITED AT AGE 60
TO AGE 69 AT THE FORMER PENSION
SYSTEM BEING A LOT BETTER SHAPE.
YEAH, THAN THAN WHAT THE REFORMS
ARE TRYING TO BRING ABOUT. AND
IT'S, I'M HAVING A GOOD TIME.
BUT, THERE ARE A LOT OF PEOPLE
THAT DON'T HAVE THAT SAME
EXPERIENCE. AND SO, THEY RETIRE
EARLIER. THANK YOU. I HAVE A
QUESTION, ASSEMBLY MEMBER LACKEY
. YEAH. I'M GOING TO ASK A
QUESTION THAT MAY COME ACROSS AS
UNFRIENDLY, BUT, IT'S NOT MEANT
TO BE. I THINK IT NEEDS TO BE
ASKED BECAUSE WE'RE ALL HERE
BECAUSE THERE'S DIVESTMENT
CONSIDERATIONS. IS THERE ANY
SCENARIO AT ALL WHERE DIVESTMENT
DOES NOT PUT THIS FUNDING OR
DOES NOT ENHANCE THE UNFUNDED
LIABILITY RISK? IS THERE ANY
SCENARIO WHERE IT DOESN'T DO
THAT? I WOULD SAY THAT MIGHT BE
MORE A QUESTION FOR THE
INVESTMENT PROFESSIONALS.
GENERALLY. MY ANSWER IS
ACTUARIES TO THIS WOULD BE IF
THE BELIEF IS THAT DIVESTMENT
WILL INCREASE INVESTMENT RISK
AND POTENTIALLY RESULT IN LOWER
INVESTMENT RETURN GOING FORWARD
THAN IT IS GOING TO RAISE COST
FOR THE PLAN SPONSORS IN THOSE
CASES. IN THE CASE OF THE STATE,
IT MIGHT REQUIRE THEM TO PAY
MORE TOWARD CALPERS TO FUND THE
BENEFITS, BUT IT'S ALL A MATTER
OF IF YOU IF THE PENSION SYSTEM
IS FORCED TO DIVEST FROM
SOMETHING AND IT RESULTS IN THEM
EARNING LESS LOWER INVESTMENT
RETURN GOING FORWARD, IT IS
GOING TO RAISE PENSION COSTS.
NOW, THE QUESTION IS SCENARIO
WHERE IT DOESN'T DO THAT. SO I
WAS JUST ASKING MAYBE BECAUSE
I'M NOT A FINANCIAL
PROFESSIONAL, BUT IT SEEMS TO ME
THAT ALL IT DOES IS INCREASE
RISK. HIS Kò AT CALSTRS WE'VE
WE'VE PUBLISHED INFORMATION. I
HAVE SHOWN THAT WHEN WE HAVE
BEEN FORCED TO DIVEST, IT HAS
RESULTED IN US HAVING LOWER
INVESTMENT RETURNS. SO IF THIS
WERE TO CONTINUE GOING FORWARD,
THEN YEAH. YES. YOU VALIDATED MY
ASSUMPTION. THANK YOU, THANK
YOU, THANK YOU, DAVID. AND THANK
YOU, COMMITTEE MEMBERS. NOW
WE'LL MOVE ON TO PUBLIC COMMENT,
OR PUBLIC QUESTIONS. WE HAVE
FIVE MINUTES FOR THAT. WE HAVE A
MICROPHONE HERE TO THE LEFT OF
ME. ARE THERE ANY PUBLIC
COMMENT? S. DO YOU ALL COME
TOGETHER OR ONE TIME? YOU GUYS
CAN LINE UP. YES. IF YOU HAVE
QUESTIONS OR COMMENTS. SO IT'S
FIVE MINUTES TOTAL. TOTAL. OKAY
I'LL JUST SAY THANK YOU. SORRY.
AND I'M NOT AS PREPARED AS I
WANT TO BE BECAUSE I JUST FLEW
IN TODAY FROM A LONG TRIP. SO,
SO I'LL BE SUCCINCT AS POSSIBLE,
SO I'M FATIMA IQBAL ZUBAIR FROM
CALIFORNIA ENVIRONMENTAL VOTERS.
I'M ALSO A FORMER TEACHER. AND,
YOU KNOW, WOULD HAVE BEEN A
POTENTIAL PENSION HOLDER, ALSO A
MOM TO A SON IN PUBLIC SCHOOL.
SO A LOT OF INTEREST IN THIS,
YOU KNOW, AND I ALSO CARE ABOUT
FRONTLINE COMMUNITIES AND
VULNERABLE COMMUNITIES THAT ARE
SUSCEPTIBLE TO CLIMATE CHANGE. I
KNOW THAT, YOU KNOW, CALSTRS AND
CALPERS HAVE BEEN LEADERS IN
MANY SUSTAINABILITY EFFORTS.
BUT, YOU KNOW, MY VIEW IS THAT
THESE EFFORTS DON'T GO FAR
ENOUGH, YOU KNOW, THERE WAS A
QUESTION JUST ASKED ABOUT, YOU
KNOW, THE RISK AND I WOULD ARGUE
THAT, YOU KNOW, WHAT MAKES
RETURNS WORSE FOR A PENSION FUND
ARE WHEN THE INVESTMENT IS IN A
RISKY INDUSTRIES, THAT HAS
ACTUALLY BAD FOR RETURNS. SO,
YOU KNOW, AND THERE'S WE
ACTUALLY HAVE EVIDENCE TO, TO
SHOW THAT. SO IF THE COMMITTEE
MEMBERS ARE OPEN, I CAN WE CAN
SEND THOSE THOSE OVER. ALSO, THE
POLICY OF ENGAGEMENT HAS PROVEN
A LOT TO BE INEFFECTIVE. AND THE
TRUTH IS, WE SAW WHAT HAPPENED
WITH EXXON AND THE SHAREHOLDERS
THERE. I'M SURE YOU'RE ALL
AWARE, THE FOSSIL FUEL INDUSTRY
IS ALSO NOT DIVERSIFYING AND NOT
CHANGING ITS BUSINESS MODEL.
IT'S ACTUALLY DOUBLING DOWN ON
ITS WORK TO SLOW THE TRANSITION
AND IN, YOU KNOW, GREEN
TECHNOLOGY, AND SO, ONE THING I
WILL ALSO STATE IS THAT,
DIVESTING, YOU KNOW, THE REASON
THAT I, YOU KNOW, WE BELIEVE IN
AS AN ORGANIZATION IS THAT IT
ENDS, THE CONTRADICTORY ACTIONS
AND POSITION THE STATE AS A
LEADER IN THE FIGHT AGAINST
CLIMATE CHANGE, YOU KNOW, WHEN
WE'RE INVESTING IN AN INDUSTRY,
IT'S A RISKY INDUSTRY. IT'S
GOING AGAINST OUR VALUES AS
WELL, AND ALSO TO DATE, I JUST
WANT TO NOTE THAT OVER 1600
INSTITUTIONS WORLDWIDE HAVE
DIVESTED, INCLUDING THE
UNIVERSITY OF CALIFORNIA,
INCLUDING CALIFORNIA STATE
UNIVERSITY SYSTEMS, AND WOULD
LOVE TO, YOU KNOW, SEND YOU ALL
IN THE COMMITTEE. THESE REPORTS
SO YOU CAN SEE HOW SUCCESSFUL
THAT HAS BEEN. BECAUSE THE FACT
IS WE WANT OUR TEACHERS, OUR
PUBLIC WORKERS TO BE PROTECTED,
AND WE SHOULD BE INVESTING, YOU
KNOW, IN, IN THE COMPANIES THAT
ARE GOING TO MAXIMIZE THOSE
RETURNS AND NOT CAUSE TEACHERS
TO HAVE TO PAY MORE INTO THE
FUND, WHICH I AGREE WITH. SO
THANK YOU. THANK YOU. IS THERE
ANYONE ELSE WITH PUBLIC COMMENT?
AGAIN, THANK YOU FOR BEING Ó.
COME ON UP. THANK YOU, CYNTHIA
KAUFMAN I WAS PLANNING ON
COMMENTING ON THE NEXT ONE, BUT
I DID WANT TO JUST JUST LIKE
FATIMA, ALSO JUMP IN ON THIS,
WHICH IS TO SAY THAT WHEN THE
FUNDS HAVE, DIVESTED, THEY'VE
OFTEN DONE MUCH BETTER. RIGHT?
AND AS FATIMA SAID, FOSSIL FUELS
ARE INCREDIBLY VOLATILE,
INCREDIBLY RISKY PART OF THE
PORTFOLIO. AND IT'S A DYING
SECTOR. AND THERE'S NO REASON TO
BELIEVE THAT IN TEN YEARS, THAT
SECTOR IS GOING TO BE DOING
BETTER THAN IT'S DOING RIGHT
NOW. THANK YOU VERY MUCH. CAN
YOU GIVE US YOUR NAME OR
ASSOCIATION? CYNTHIA KAUFMAN AND
I VOLUNTEER WITH FOSSIL FREE
CALIFORNIA, AND I'M THE DIRECTOR
OF THE VASCONCELLOS INSTITUTE
FOR DEMOCRACY AND ACTION. THANK
YOU AGAIN. THANK YOU FOR BEING
HERE TODAY, IN YOUR
PRESENTATION, DAVID WAS
EXCELLENT. WE APPRECIATE YOU. I
THINK I TURNED MYSELF OFF AGAIN,
NOW WE'LL MOVE TO THE SECOND
PART OF THIS HEARING. WE HAVE
REPRESENTATIVES FROM CALPERS AND
CALSTRS WHO WILL DISCUSS THEIR
EMERGING CLIMATE INVESTMENT
INITIATIVES AS THEY COME ON THE
SCREEN. I THINK WE'RE GOING TO
HAVE SOMEONE COME ON THE SCREEN.
IS THAT RIGHT? OH, THERE SHE IS.
OKAY. WE WELCOME FROM THEIR TIME
AND PARTICIPATION TODAY. I ALSO
ASK THE PUBLIC TO BE COURTEOUS
AND NOT INTERRUPT THIS PART OF
THE HEARING OR THEIR
PRESENTATION. EACH SYSTEM CEO,
PLEASE INTRODUCE YOURSELF,
OTHERS WHO ARE WITH YOU TODAY
AND PROVIDE A BRIEF OVERVIEW OF
YOUR SYSTEM. OF COURSE, IF YOU
HAVE MORE INFORMATION TO PROVIDE
BEYOND AN OVERVIEW, YOU'RE
WELCOME TO DO SO. YOU MAY
PROCEED WHEN READY. ALL RIGHT,
ALL RIGHT. GOOD MORNING, CHAIR
MCKENNA. I'M ASSUMING YOU'RE
WANTING ME TO GO AHEAD AND MOVE
FORWARD. YES. THANK YOU, GOOD
MORNING, CHAIR MCKENNA AND CHAIR
SMALLWOOD. CUEVAS AND COMMITTEE
MEMBERS, MY NAME IS MARCY FROST,
AND I'M THE CEO AT CALPERS. LET
ME BEGIN BY APOLOGIZING FOR NOT
BEING ABLE TO JOIN YOU IN PERSON
TODAY. I'M CURRENTLY IN NEW YORK
AND DOING A NUMBER OF BUSINESS
MEETINGS THAT WERE ON MY
CALENDAR BEFORE THE RESCHEDULED
DATE CAME IN, BUT I REALLY
APPRECIATE THE WORK YOUR TEAM
DID TO PROVIDE THIS VIRTUAL
OPTION SO THAT I COULD
PARTICIPATE. IT WAS REALLY
IMPORTANT FOR ME TO HAVE THIS
OPPORTUNITY TO SPEAK FOR A FEW
MINUTES ABOUT A VERY CRITICAL
ISSUE, AN ISSUE THAT I KNOW THAT
I'VE HAD SEVERAL CONVERSATIONS,
THROUGHOUT MY TIME AT CALPERS.
IN LIEU OF MY IN-PERSON,
PRESENCE. WE DO HAVE A CHIEF
OPERATING INVESTMENT OFFICER,
MICHAEL COHEN. HE'S THERE WITH
YOU IN THE HEARING ROOM, AND
WE'LL CONTINUE THE CONVERSATION.
AND WE'LL ALSO BE AVAILABLE TO
HELP ANSWER ANY QUESTIONS THE
COMMITTEE MAY HAVE. AS YOU KNOW,
CALPERS IS THE LARGEST PUBLIC
PENSION FUND IN THE UNITED
STATES, WITH ALMOST A HALF
TRILLION DOLLARS IN ASSETS UNDER
MANAGEMENT. AND WE INVEST THAT
THOSE ASSETS ON THE BEHALF OF
ABOUT 2.2 MILLION MEMBERS WHO
WORK IN COMMUNITY. EXCUSE ME,
COMMUNITIES ACROSS THE STATE, AS
WE LIKE TO SAY, WE SERVE THOSE
WHO SERVE CALIFORNIA. SO I WANT
TO BEGIN OUR DISCUSSION OF
CALPERS APPROACH TO CLIMATE
CHANGE BY TALKING ABOUT THE
CONCEPT OF RISK. ALMOST EVERY
INVESTMENT CARRIES SOME LEVEL OF
RISK. OUR JOB, AND A KEY PART OF
OUR FIDUCIARY DUTY TO CALPERS
MEMBERS, IS TO BE REALLY GOOD AT
MEASURING AND UNDERSTANDING
RISK. BUT NOT ALL RISK IS BAD
WHEN IT COMES TO INVESTING. THE
GREATER THE AMOUNT OF RISK AN
INVESTOR TAKES, THE GREATER THE
RETURN THAT WE'RE GOING TO
EXPECT. SOME RISK IS WORTH THE
OPPORTUNITY. K¾T WHAT WE HAVE TO
AVOID IS SYSTEMIC RISK, THE KIND
OF WIDESPREAD DISRUPTION THAT
POSES FINANCIAL DANGER TO
INVESTORS AND CLIMATE CHANGE IS
A SYSTEMIC RISK. THE SIZE AND
SCOPE OF CLIMATE CHANGE POSES A
VARIETY OF THREATS ACROSS THE
CALPERS PORTFOLIO,
INFRASTRUCTURE AND REAL ESTATE
ARE VULNERABLE TO DROUGHTS,
FLOODS, FIRES AND OTHER EXTREME
CONDITIONS. THESE PHYSICAL RISKS
ALSO THREATEN THE SUPPLY CHAINS
FOR COMPANIES IN WHICH WE INVEST
, MAKING FINANCIAL MARKETS MORE
VOLATILE. EXISTING BUSINESS
MODELS ACROSS THE WORLD ARE
SUBJECT TO TRANSITION RISK
CAUSED BY CLIMATE CHANGE. IF
COMPANIES CAN'T CONTINUE TO
PROFIT, INVESTORS WILL PAY THE
PRICE. THE CALPERS ROADMAP FOR
ADDRESSING CLIMATE CHANGE IS OUR
SUSTAINABLE INVESTMENTS PLAN,
AND WE ANNOUNCED THIS PLAN JUST
A FEW MONTHS AGO. WE BELIEVE
THAT IT'S NOT SO MUCH ABOUT
PROTECTING OUR PORTFOLIO FROM
CLIMATE CHANGE, BUT RATHER
TRANSFORM OUR PORTFOLIO TO
INVEST IN THE INDUSTRIES THAT
ARE GROWING IN RESPONSE TO
CLIMATE CHANGE. WHEN WE INVEST
IN THESE INDUSTRIES, WE CAN
PROVIDE STRONG RETURNS AND ALSO
HELP TO DECARBONIZE THE ECONOMY.
EXCUSE ME, THE GLOBAL ECONOMY.
YOU WILL HEAR MORE ABOUT OUR
PLAN IN A FEW MOMENTS, AND OUR
INVESTMENTS IN ACTIVITIES
RELATED TO CLIMATE ADAPTATION,
MITIGATION AND TRANSITION. AND I
WANT TO BRIEFLY TELL YOU THAT
BEYOND CLIMATE CHANGE, THERE ARE
OTHER ESSENTIAL PARTS OF OUR
SUSTAINABLE INVESTING PLAN.
THESE INCLUDE A COMMITMENT TO
LABOR PRINCIPLES, THE IMPORTANCE
DIVERSITY, EQUITY AND INCLUSION
WHEN IT COMES TO OUR INVESTMENTS
AND ALSO CONTINUING OUR VITAL
ROLE IN CORPORATE GOVERNANCE.
THE LAST ITEM ON CORPORATE
GOVERNANCE EXPLAINS WHY WE'VE
BEEN TALKING SO MUCH IN RECENT
WEEKS. ABOUT ONE EXAMPLE OF OUR
BELIEF IN CORPORATE GOVERNANCE
EARLIER TODAY. ALSO, PART OF THE
REASON THAT I'M HERE IN NEW YORK
, WE VOTED AGAINST THE BOARD OF
DIRECTORS OF EXXONMOBIL AND THE
COMPANY'S CEO FOR TAKING LEGAL
ACTION AGAINST SHAREHOLDERS WHO
SIMPLY WANTED TO BE HEARD AT
THEIR ANNUAL SHAREHOLDER
MEETINGS. BUT FOR THIS HEARING,
WE WILL FOCUS ON OUR $100
BILLION CLIMATE ACTION PLAN.
CALPERS LAUNCHED THIS EFFORT
LAST FALL, AND IT WILL MORE THAN
DOUBLE THE SIZE OF OUR CLIMATE
PORTFOLIO OVER THE NEXT SIX
YEARS. WE EXPECT, EXCUSE ME, WE
EXPECT THESE INVESTMENTS TO CUT
THE CARBON INTENSITY OF OUR
PORTFOLIO BY HALF, AND THE PLAN
IS AN IMPORTANT STEP ON A MUCH
LARGER JOURNEY TOWARD OUR NET
ZERO PATH. AT 2050, OUR TEAM
WILL SOON REPORT SIZABLE NEW
CLIMATE INVESTMENTS MADE IN
RECENT WEEKS, WITH MORE
INVESTMENTS BY YEARS END AND
SUSTAINED EFFORTS THROUGH 2030.
I WANT TO HIGHLIGHT ONE KIND OF
CLIMATE INVESTING OPPORTUNITY
THAT I DON'T THINK REALLY GETS
ENOUGH ATTENTION, AND THAT'S THE
OPPORTUNITY TO PROVIDE THE
CAPITAL THAT SOME COMPANIES
BADLY NEED TO TRANSITION TO
RENEWABLE ENERGY. IF WE SIMPLY
FOCUSED ON REDUCING OUR
PORTFOLIOS ABSOLUTE EMISSIONS,
WE COULDN'T INVEST IN THESE
KINDS OF COMPANIES BECAUSE THEY
WOULD BE CONSIDERED TOO DIRTY
FOR INVESTMENT. BUT IF THESE
COMPANIES DON'T REDUCE THEIR
EMISSIONS, WE ARE ALL AT RISK.
THE GOAL ISN'T JUST TO MAKE OUR
PORTFOLIO LOOK GOOD, IT'S ALSO
TO ENSURE THAT THE PORTFOLIO
MAKES A DIFFERENCE BY PROVIDING
SECURE BENEFITS AND COMBATING
CLIMATE CHANGE. NO MATTER WHAT
SOME MIGHT TELL YOU. I'VE HEARD
THESE ARGUMENTS BEFORE. THESE
GOALS ARE NOT MUTUALLY
EXCLUSIVE. OUR SUSTAINABLE
INVESTMENTS PLAN ALSO INCLUDES
THE NEXT PHASE OF A VITAL TOOL
THAT I MADE NOTE OF A FEW
MINUTES AGO. OUR ENGAGEMENT AS
COMPANY SHAREHOLDERS ENGAGEMENT
IS A DIALOG, ONE THAT HOLDS
COMPANIES ACCOUNTABLE FOR
CREDIT. EXCUSE ME. CREDIBLE
CLIMATE STRATEGIES. AND BY
CREDIBLE WE MEAN THAT A
COMPANY'S CLIMATE PLAN PASSES
THROUGH BOTH A SCIENCE BASED
LENS AND A FIDUCIARY LENS. AND I
CAN'T STRESS ENOUGH HOW
IMPORTANT IT IS TO ASSESS BOTH
CRITERIA. IF A COMPANY FAILS
THESE TESTS, THAT'S THE KIND OF
RISK WE NEED TO MINIMIZE. NOW,
NONE OF THIS IS EASY. SLOGANS
ARE EASY. STATEMENTS OF
PRINCIPLE ARE EASY. CAREFUL
STRATEGIC INVESTING IS REALLY
HARD. AND IT DOES TAKE TIME. IT
ALSO TAKES HELP. AND SO I WANT
TO THANK THE LEGISLATURE FOR ITS
EFFORTS LAST YEAR IN PROMOTING
GREATER CORPORATE TRANSPARENCY
REGARDING CARBON EMISSIONS. THAT
DATA WILL BE AN ESSENTIAL PART
OF OUR WORK, BOTH IN OUR
SUSTAINABLE INVESTING 2030 PLAN
AS WELL AS THE REST OF THE
PORTFOLIO. WE KNOW THE CLOCK IS
TICKING ON ADDRESSING CLIMATE
CHANGE. WE KNOW WE NEED TO MOVE
WITH SPEED, BUT WE ALSO NEED TO
MAKE SURE THAT OUR ACTIONS PASS
THE HIGH HURDLE OF FIDUCIARY
DUTY. WE ARE NOT JUST INVESTORS.
WE KNOW OUR MEMBERS DEPEND ON US
TO PROVIDE THE RETIREMENT
BENEFITS THAT THEY'VE BEEN
PROMISED, AND WE BELIEVE WE CAN
PLAY AN IMPORTANT ROLE IN THIS
CRITICAL EFFORT. AND WE WELCOME
THE CHANCE TO TELL YOU MORE
ABOUT HOW WE'RE DOING THAT, BOTH
TODAY AND IN MANY MORE
CONVERSATIONS TO COME. SO THANK
YOU AGAIN FOR ALLOWING ME TO
JOIN YOU REMOTELY. I'LL STAY ON
AND WHEN YOU'RE READY, WE WILL
BE HAPPY TO ANSWER ANY QUESTIONS
YOU MAY HAVE. THANK YOU. THANKS,
MARCY. I'M MICHAEL COHEN, THE
CHIEF OPERATING INVESTMENT
OFFICER FOR CALPERS, THANK YOU
FOR HAVING ME. IT'S NICE TO BE
BACK IN FRONT OF THE
LEGISLATURE. LET ME DIG A LITTLE
BIT. NOT AT ALL. I THINK I WAS
IN THIS ROOM FOR, GOVERNOR'S
REORGANIZATION PLAN, THE LAST
THE LAST TIME I WAS HERE, AS
MARCY POINTED OUT, CALPERS IS
FOCUSED ON INVESTMENT RETURNS BY
FINANCING THE GLOBAL ENERGY
TRANSITION. WE ALSO TALK ABOUT
THIS TRANSITION AND BEING A JUST
TRANSITION. AND THAT REFERENCES
IS, THE DI AND THE LABOR
PRINCIPLES THAT AREN'T REALLY
PART OF MY COMMENTS TODAY
BECAUSE WE'RE FOCUSED MORE ON
THE CLIMATE ASPECTS OF OUR PLAN.
BUT ARE ABSOLUTELY CRITICAL
COMPONENTS OF THE WAY WE THINK
ABOUT SUSTAINABILITY, LAST YEAR
ALONE, WORLDWIDE CLIMATE
INVESTMENTS TOTALED SOME $1.7
TRILLION. FOR CONTEXT, THAT'S
ROUGHLY HALF OF CALIFORNIA'S
ENTIRE ECONOMY. THAT SAID,
THAT'S PROBABLY NOT GOING TO BE
ENOUGH. IN FACT, A NEW STUDY
FROM BLOOMBERG NEF ESTIMATES
THAT GETTING TO NET ZERO BY 2050
IS GOING TO REQUIRE A TOTAL OF
$215 TRILLION WORTH OF
INVESTMENT. SO FOR US THAT
ACTUALLY PROVIDES HIGH QUALITY
INVESTMENT OPPORTUNITIES FOR
THOSE THAT HAVE LARGE POOLS OF
CAPITAL LIKE CALPERS AND OUR
SUSTAINABLE INVESTMENTS 2030
PLAN IS INVESTING IN THESE TYPES
OF OPPORTUNITIES. THESE CLIMATE
INVESTMENTS WILL BE SOME OF THE
WORLD'S MOST SIGNIFICANT
INVESTMENTS TO DATE. GROWING OUR
PORTFOLIO WHILE ALSO MAKING IT
MORE RESILIENT. LET ME DIG A
LITTLE DEEPER INTO THE PLAN.
LAST NOVEMBER, WE ANNOUNCED OUR
$100 BILLION CLIMATE ACTION
PLAN, A SIGNIFICANT NEW
INITIATIVE THAT WILL GET OUR
PORTFOLIO TO NET ZERO BY 2050.
THE CHART WE PROVIDED FOR
TODAY'S HEARING LAYS OUT FIVE
IMPORTANT COMPONENTS OF THE
PLAN. THIS IS ON SLIDE THREE. IF
YOU HAVE THE MATERIALS IN FRONT
OF YOU FIRST, INCREASED
INVESTMENTS. SECOND, MORE
ENGAGEMENT WITH COMPANIES ON
INVESTING IN CLIMATE SOLUTIONS
AND TAKING ADVOCACY EFFORTS THAT
PROMOTE DECARBONIZATION. THIRD,
DEVELOPING A NEW PROCESS TO
POTENTIALLY EXIT CERTAIN
INVESTMENTS WHEN A COMPANY LACKS
A CREDIBLE NET ZERO PLAN.
FOURTH, INTEGRATING CLIMATE
RISKS INTO CALPERS INVESTMENTS
DECISIONS AND FINALLY, ENHANCING
OUR MEASUREMENTS AND REPORTING
OF PORTFOLIO EMISSIONS, THE PLAN
INCLUDES A WIDE ARRAY OF
OPPORTUNITIES THAT MEET OUR
GOALS FOR GENERATING EXCESS
RETURNS AMONG ABOVE OUR
BENCHMARK TARGETS. IN OTHER
WORDS, OUR INVESTMENT PREMISE IS
THAT WE CAN BOTH MAKE MONEY AND
HELP SPUR THE GLOBAL ECONOMY TO
ADDRESS CLIMATE CHANGE. THE $100
BILLION CLIMATE ACTION PLAN
ACCELERATES THE WORK THAT'S
ALREADY WELL UNDERWAY. WE ENDED
LAST CALENDAR YEAR WITH ROUGHLY
$47 BILLION IN CLIMATE
INVESTMENTS. AND SO WE'RE LESS
THAN HALFWAY THERE TO THE $100
BILLION MARK. THESE INVESTMENTS
ARE LARGELY AS SHOWN ON SLIDE
FOUR IN OUR PUBLIC EQUITY
HOLDINGS AND OUR REAL ESTATE
PORTFOLIO. IT INCLUDES
INVESTMENTS IN RENEWABLE ENERGY,
SUSTAINABLE PACKAGING, ELECTRIC
VEHICLES AND GREEN BUILDINGS,
JUST TO NAME A FEW EXAMPLES. THE
$100 BILLION CLIMATE ACTION PLAN
INCLUDES SIGNIFICANT INVESTMENTS
ACROSS ALL FIVE OF OUR ASSET
CLASSES. WE'RE INTENTIONALLY
VERY DIVERSIFIED BY INVESTING
BOTH ON THE PUBLIC AND THE
PRIVATE MARKET SIDES.
SPECIFICALLY, AS NOTED IN SLIDE
FIVE, WE'LL FOCUS OUR
OPPORTUNITIES IN THREE SPECIFIC
TYPES OF CLIMATE INVESTMENTS.
THERE ARE PARTS OF THE EFFORT.
THESE ARE PARTS OF THE EFFORT TO
MORE THAN DOUBLE OUR CLIMATE
PORTFOLIO IN THE NEXT SIX YEARS.
FIRST, CALPERS WILL INVEST IN
CLIMATE CHANGE MITIGATION
EFFORTS. THESE ARE INVESTMENTS
TO REDUCE EMISSIONS SUCH AS
RENEWABLE ENERGY, CARBON CAPTURE
AND STORAGE, AND WASTE
MANAGEMENT. THE PLAN ALSO CALLS
FOR INVESTMENTS IN ADAPTATION
STRATEGIES IN THIS CATEGORY,
THINKS OF THOSE, THINK OF THOSE
THINGS THAT HELP US MANAGE
FLOODS AND DROUGHTS, SUCH AS
DEVELOPING HEAT RESISTANT CROPS
OR INVESTING IN TECHNOLOGY
RELATED TO DISASTER
PREPAREDNESS. FINALLY WE'RE
SEEKING TO SUPPORT CLIMATE
TRANSITION INVESTMENTS THAT
MARCI REFERENCED. THESE
INVESTMENTS WILL HELP COMPANIES
WITH HIGH EMISSIONS BECOME PART
OF THE SOLUTION. INSTEAD OF PART
OF THE PROBLEM. THERE'S
TREMENDOUS OPPORTUNITY TO
PROVIDE CAPITAL TO COMPANIES
THAT WANT TO MOVE FROM SO-CALLED
BROWN ENERGY PRODUCTION TO GREEN
. THE EXAMPLE WE'VE USED BEFORE
IN THIS AREA IS A UTILITY THAT
MIGHT STILL HAVE COAL FIRED
POWER GENERATION, BUT THEY WANT
TO TRANSITION TO RENEWABLE POWER
. DOING SO WOULD BOTH BENEFIT
THE CLIMATE AND THE COMPANY'S
BOTTOM LINE. THESE TYPES OF
COMPANIES NEED OUR INVESTMENT
DOLLARS. WALKING AWAY FROM THE
OPPORTUNITIES COULD STALL OR
EVEN DERAIL SUCH CRITICALLY
IMPORTANT TRANSITIONS. OUR
SUSTAINABLE INVESTING PLAN IS
BALANCED. IT'S ALIGNED WITH THE
BEST PRACTICES OF CLIMATE
SCIENCE AND CLIMATE FINANCE, AND
IT'S AT THE SCALE THAT WILL HAVE
AN IMPACT NOW AND WELL INTO THE
FUTURE. AS I'VE SAID, WE'RE WELL
UNDERWAY AND AS MARCI JUST
REFERENCED, WE'LL HAVE MORE NEWS
ON SPECIFIC INVESTMENTS THAT
WE'RE MAKING IN THE COMING
WEEKS. I'D LIKE TO SPEND A FEW
MORE MINUTES TO TALK TO YOU
ABOUT ANOTHER IMPORTANT PART OF
OUR $100 BILLION CLIMATE ACTION
PLAN. THAT'S THE EFFORT TO
EXPAND AND STRENGTHEN OUR
ENGAGEMENT EFFORTS. WE ENGAGE
WITH COMPANIES WHEN IT COMES TO
WHETHER THEY'RE DOING ENOUGH TO
ADDRESS CLIMATE CHANGE. FIRST,
LET ME EXPLAIN WHAT ENGAGEMENT
MEANS. CALPERS, AS YOU KNOW, IS
THE LARGEST PUBLIC PENSION IN
AMERICA. THAT MEANS WE OWN
ROUGHLY 6000 PUBLICLY TRADED
COMPANIES. SO WE'RE AS A LARGE
STOCKHOLDER, WE HAVE A VOICE
THAT CAN'T BE IGNORED. OUR TEAM
REGULARLY MEETS WITH THE LEADERS
OF DOZENS OF COMPANIES URGING
ACTION ON CLIMATE RELATED ISSUES
THAT WE BELIEVE POSE THAT
SYSTEMIC RISK TO OUR
INVESTMENTS. WE'RE NOT SILENT
PARTNERS WHEN IT COMES TO
CLIMATE ISSUES. WE KNOW THAT
ENGAGEMENT OFTEN DOESN'T GET A
LOT OF CREDIT FOR BRINGING
CHANGE, BUT SPEAKING UP AND
DEMANDING ACTION IS A POWERFUL
TOOL. LAST FALL, A GROUP OF
ACADEMICS, INCLUDING TWO
PROFESSORS AT USC, RELEASED A
STUDY OF CLIMATE CHANGE
ENGAGEMENT BY PUBLIC PENSION
FUNDS, INCLUDING CALPERS. WE'VE
PROVIDED YOU THE COMMITTEE A
COPY OF THAT REPORT. THE
RESEARCH RESEARCHERS WANTED TO
ANSWER THE FUNDAMENTAL QUESTION
OF WHETHER A COMPANY WAS MORE
LIKELY TO REDUCE ITS CARBON
EMISSIONS WHEN A PENSION FUND
USED ITS OWNERSHIP TO DEMAND
CHANGE, OR WHETHER THOSE
PRO-CLIMATE CHANGES WOULD STILL
OCCUR IF A PENSION FUND SOLD OFF
ALL OF ITS SHARES. THE KEY
FINDING OF THAT REPORT WAS THAT
BUYING MORE SHARES OF A COMPANY
AND ENGAGING WITH THEM ON
EMISSIONS REDUCTION HAS A REAL
IMPACT. TO QUOTE THE REPORT,
ENGAGEMENT REDUCED EMISSIONS.
AND AS MARCI NOTED IN HER
INTRODUCTORY REMARKS, THE REASON
WE'VE SPENT SO MUCH TIME OVER
THE LAST COUPLE OF WEEKS TALKING
ABOUT EXXON IS THAT WE BELIEVE
OUR VOICE IS A LARGE
SHAREHOLDER, NEEDS TO BE HEARD.
THAT'S EXACTLY WHAT ENGAGEMENT
IS ALL ABOUT. LET ME GIVE YOU
TWO MORE REAL WORLD EXAMPLES
ABOUT HOW CALPERS HAD SUCCESS IN
THE ENGAGEMENT REALM. FIRST,
TRAIN TECHNOLOGY. THERE ARE
LONGTIME LEADER IN HEATING, AIR
CONDITIONING AND REFRIGERATION.
AS A LARGE INVESTOR, WE'VE
ADVOCATED NOT ONLY FOR A NET
ZERO POLICY, BUT ALSO FOR TRAIN
TO REDUCE AND SET SHORT TERM
EMISSION TARGETS. AND IT WORKED.
TRAIN WAS THE FIRST COMPANY IN
ITS INDUSTRY TO ADOPT A NET ZERO
TARGET, APPROVED BY SCIENCE
BASED TARGETS INITIATIVE, AND
CALPERS HAD A MEANINGFUL ROLE IN
THAT PROCESS. THE SECOND EXAMPLE
IS TOYOTA, WHERE WE'RE ALSO A
SIZABLE SHAREHOLDER. WE PUSHED
FOR A 30% CUT IN GREENHOUSE GAS
EMISSIONS OVER THE LIFE OF A
VEHICLE. WELL, LOOK, ENGAGEMENT
IS NOT ALWAYS PERFECT, BUT IT
DOES WORK. ENGAGEMENT RELIES ON
CLEAR, CONSISTENT DATA FROM
THESE COMPANIES AND THROUGH
GROUPS LIKE CLIMATE ACTION 100
PLUS, AN ORGANIZATION LIKE
CALPERS HELPED CREATE. WE'VE
WORKED HARD TO MAKE COMPANIES
MORE TRANSPARENT ABOUT THEIR
CARBON FOOTPRINTS. THE WORK IS
GOING TO CONTINUE IN THE COMING
YEAR. LAST MONTH, I WAS NAMED AS
THE CHAIR OF THE STEERING
COMMITTEE FOR CLIMATE ACTION 100
TO ENSURE THE ORGANIZATION
CONTINUES ITS HARD WORK AND
MEETS THE CHALLENGES OF CLIMATE
CHANGE HEAD ON. OUR CLIMATE
ACTION PLAN PROVIDES AN
IMPORTANT EVOLUTION IN
ENGAGEMENT. WE'RE ESTABLISHING
NEW EVIDENCE BASED GUIDELINES TO
VERIFY WHETHER A COMPANY HAS A
CREDIBLE NET ZERO PLAN. WE'LL
FOCUS ON THE HIGHEST EMITTING
COMPANIES THAT WILL HAVE THE
LARGEST CARBON FOOTPRINTS, HIGH
EMITTING COMPANIES WITHOUT A
CREDIBLE NET ZERO PLAN LIKELY
PUTS OUR INVESTMENTS AT RISK,
WHICH IS CONTRARY TO OUR
FIDUCIARY DUTY. A MISSING PLAN
FROM A COMPANY WILL COMPEL US TO
ACT, INCLUDING REDUCING OUR
INVESTMENTS SIGNIFICANTLY OR
CANCELING IT ALTOGETHER. WE'RE
GOING TO HOLD OURSELVES
ACCOUNTABLE FOR RESULTS, AND
WE'LL REPORT ANNUALLY AS WE
APPROACH 2030. THESE HIGHLIGHTS
ARE JUST A FEW REASONS WHY WE
BELIEVE OUR SUSTAINABLE
INVESTING PLAN IS AN EXAMPLE OF
CALIFORNIA LEADING THE WAY FOR
THE REST OF THE WORLD WHEN IT
COMES TO FIGHTING CLIMATE CHANGE
AND RESPONDING TO ITS RISKS. OUR
WORK IS VITALLY IMPORTANT BOTH
FOR OUR MEMBERS, THOSE THAT OUR
CURRENT WORKERS AND RETIRED
PUBLIC SERVANTS, AND FOR THE
GLOBAL ECONOMY. WE'RE WORKING
CLOSELY WITH OUR PARTNERS ACROSS
CALIFORNIA AND INTERNATIONALLY
ON BEST IN CLASS INVESTMENTS,
AND WE'RE WORKING FOR
CONSISTENT, TRANSPARENT
EXPECTATIONS FOR THE COMPANIES
IN WHICH WE INVEST. THANK YOU
FOR YOUR TIME. I'LL HAPPILY
ANSWER ANY QUESTIONS ONCE THE
REST OF THE PANEL PROVIDES THEIR
PRESENTATIONS. GOOD MORNING.
CHAIRWOMAN MCKENNA AND
CHAIRWOMAN SMALLWOOD. CUEVAS,
IT'S NICE TO SEE YOU AGAIN AND
NICE TO MEET YOU. AND GOOD
MORNING, MEMBERS OF THE
COMMITTEE. I WANTED TO THANK YOU
FOR THE OPPORTUNITY TO BE HERE
TODAY, AND I WANTED TO START
WITH THE CALSTRS MISSION, WHICH
IS WHAT WE'RE HERE FOR AT
CALSTRS, WHICH IS TO PROVIDE A
SECURE RETIREMENT TO OUR
MEMBERS, OUR CALIFORNIA PUBLIC
EDUCATORS. AND I'M CASSANDRA
LYNCH, THE CEO OF CALSTRS. THANK
YOU, I'M HERE TODAY WITH OUR
NEWLY APPOINTED CIO, SCOTT CHAN.
HE IS GOING TO BE TAKING THE
HEAD OF THE INVESTMENT BRANCH,
EFFECTIVE JULY 1ST, AND MY
INVESTMENT DIRECTOR OVER OUR
SUSTAINABLE INVESTMENT AND
STEWARDSHIP STRATEGIES,
PORTFOLIO KHÓ, WHICH WE TERM
SIS. SO THAT'S A LOT EASIER THAN
THAT, LONG NAME. I ALSO WANTED
TO PROVIDE YOU A SNAPSHOT OF THE
CALSTRS MEMBERSHIP. CALSTRS HAS
OVER A MILLION MEMBERS, MAKING
US THE LARGEST EDUCATOR ONLY
PENSION FUND IN THE WORLD. OVER
70, 72.5% OF OUR MEMBERSHIP IS
FEMALE, WHICH IMPACTS A NUMBER
OF THINGS IN OUR ON HOW WE LOOK
AT OUR LIABILITIES AND
ASSUMPTIONS IN THE ORGANIZATION.
AND A LOT OF THE WORK THAT
DAVID, LOOKS AT WHEN WE'RE
EVALUATING, THE, THE MEMBERSHIP,
OUR MEMBERS RETIRE ON AVERAGE OF
62 YEARS OF AGE WITH 25 YEARS OF
SERVICE AND RECEIVE AN AVERAGE
MONTHLY BENEFIT OF $4,600 PER
MONTH. OUR MEMBERS DO NOT
PARTICIPATE IN SOCIAL SECURITY,
SO OUR BENEFITS PHÐ OUR BENEFIT
PROVIDED TO THEM MAY BE THE ONLY
RETIREMENT INCOME THAT OUR
MEMBERS RECEIVE FOR THE
REMAINDER OF THEIR LIVES. THIS
COULD BE THE ONLY RETIREMENT
INCOME THAT THEY HAVE. THE VALUE
OF THE DEFINED BENEFIT IS ALSO
LISTED IN SOME OF THE CONTEXT OF
THE SLIDES. BUT WHAT I WANTED TO
MOVE TOWARDS IS THE LONGEVITY
THAT OUR MEMBERS, HAVE IN OUR
SYSTEM. AND IT'S SOMETHING THAT
DAVID ALREADY SPOKE TO. BUT IF
YOU CAN SEE ON SLIDE ON PAGE
THREE, ON SLIDE FIVE, THE
DIFFERENCE IS BETWEEN WHAT THE
NATIONAL LONGEVITY PATTERNS ARE
REFLECTIVE IN THE SOCIAL
SECURITY CHART, BAR CALPERS BAR,
WHICH IS REFLECTIVE OF
CALIFORNIA LONGEVITY PATTERNS
AND CALSTRS, WHERE WE REALIZE A
THREE YEAR LONGEVITY IMPROVEMENT
IN OUR MEMBERSHIP BECAUSE OF A
NUMBER OF DIFFERENT FACTORS. ONE
OF THOSE FACTORS IS THAT THE
FEMALES LIVE LONGER THAN MEN.
BUT ANOTHER FACTOR THAT GOES
INTO THIS CONSIDERATION IS THAT,
PEOPLE THAT HAVE HIGHER
EDUCATIONS ALSO LIVE LONGER. AND
WE HAVE A VERY HIGHLY EDUCATED
POPULATION, 67% OF OUR
MEMBERSHIP HAS A MASTER'S DEGREE
OR HIGHER. SO THAT IMPACTS
LONGEVITY. AND A NUMBER OF OTHER
FACTORS HAVE CONTRIBUTED TO THE
FACT THAT OUR MEMBERS LIVE A
LONG TIME. THE FOLLOWING SLIDE
REFLECTS THE NUMBER OF MEMBERS
THAT WE HAVE, 430 THAT ARE OVER
100 YEARS OLD RECEIVING
RETIREMENT BENEFITS. WE WERE
SURPRISED WHEN WE LOOKED AT THE
OUR DATA ON PULLING THE
MEMBERSHIP IN THIS CATEGORY, AND
REALIZED THAT WE HAD SO MANY
MEMBERS RECEIVING RETIREMENT
BENEFITS, AND SOME OF THEM STILL
SUBSTITUTE TO THIS DAY THE
FUNDING PLAN THAT WE HAVE IN
PLACE. THAT WAS A ENACTED IN
2014 IS ON TRACK TO GET US FULLY
FUNDED BY 2046, WHERE, AS DAVID
MENTIONED, WE'RE, 75.9% FUNDED
AS OF TODAY. YOU CAN SEE ON THE
FOLLOWING CHART THAT THE INFLOWS
AND OUTFLOWS OF OUR
CONTRIBUTIONS TO BENEFIT
PAYMENTS IS IN A DEFICIT FACTOR,
MEANING THAT WE'RE HEAVILY
RELIANT ON ON INVESTMENT
RETURNS. WE HAVE 15 AS OF
BETWEEN 22 AND 23 YEARS, WE HAD
15.7 BILLION COMING IN IN
CONTRIBUTIONS AND $18.4 BILLION
PAID OUT IN RETIREMENT BENEFITS.
THAT'S $1.5 BILLION A MONTH THAT
WE PAY OUT TO OUR RETIREES. AND
THIS IS ANOTHER AREA WHICH ONE
OF THE, COMMITTEE MEMBERS ASKED
ABOUT BEING UNDERFUNDED OR
UNFUNDED. IF OUR MEMBERSHIP
LIVES ONE YEAR LONGER, THAT CAN
CREATE AN $18.4 BILLION UNFUNDED
LIABILITY BECAUSE IT WASN'T
INCLUDED IN THE ASSUMPTIONS AND
THE LONGEVITY PATTERNS, IS THAT
CORRECT? OKAY. ALL RIGHT. HE'S
HE'S GOING TO KEEP ME STRAIGHT
ON THIS, $0.61 OF EVERY BENEFIT
DOLLAR PAID COMES FROM OUR
INVESTMENT RETURNS. THAT REALLY
IS REFLECTIVE OF HOW IMPORTANT
OUR INVESTMENTS ARE. OUR NEW
CHIEF INVESTMENT OFFICER, SCOTT,
WILL BE PROVIDING INFORMATION
ABOUT INVESTMENT STRATEGIES,
INCLUDING OUR PLEDGE TO REACH A
NET ZERO GREENHOUSE GAS
EMISSIONS PORTFOLIO BY 2050 OR
SOONER. SO I'M GOING TO HAND IT
OVER TO SCOTT. GREAT. THANK YOU,
CASSANDRA, AND GOOD MORNING, I'M
REALLY DELIGHTED TO BE HERE TO
SHARE AND EMBODY THE VALUES OF
OUR TEACHERS AND TALK ABOUT OUR
CONSTITUENTS AND WHAT WE'RE
DOING AT CALSTRS. SO, AGAIN, MY
NAME IS SCOTT CHAN. I'M ACTUALLY
CURRENTLY THE DEPUTY CIO. UP
UNTIL JULY, I'LL BE THE NEXT
CHIEF INVESTMENT OFFICER,
REPLACING AND SUCCEEDING CHRIS
AILMAN, WHO YOU MAY KNOW,
CALSTRS IS THE LARGEST EDUCATOR
ONLY PENSION FUND IN THE WORLD.
WE HAVE ROUGHLY $340 BILLION IN
ASSETS UNDER MANAGEMENT. AND IN
MY ROLE AND IN MY TEAM'S ROLE,
I'M RESPONSIBLE FOR MANAGING ALL
OF CALSTRS INVESTMENTS AND
LEADING THE INVESTMENT TEAM TO
GENERATE THE TYPES OF INVESTMENT
RETURNS WE NEED TO SECURE THE
RETIREMENT FUTURE OF OVER 1
MILLION CALIFORNIA EDUCATORS AND
TO REACH OUR TARGET. FULL
FUNDING DATE IN THE YEAR 2046.
NOW, THAT SOUNDS LIKE A LOT OF
RESPONSIBILITY, BUT IT GOES
BEYOND THAT BECAUSE OUR STAFF
ARE FIDUCIARIES, AND THIS MEANS
THAT WE HAVE A MUCH HIGHER
STANDARD, A STANDARD THAT SIMPLY
GOES BEYOND DOING JUST A GOOD
JOB. WE HAVE TO ACT IN A WAY
THAT ARE THAT ARE PRUDENT
EXPERTS IN INVESTMENTS, WOULD DO
AND SOLELY IN THE BENEFIT OF OUR
BENEFICIARIES. SO WHILE WE'RE
URGENTLY INVESTING ALONG THIS
ENERGY TRANSITION, WE HAVE TO
KEEP THAT IN MIND. THE RISK
RETURN ASPECTS OF THAT, WE DO
HAVE TO ALSO DO WHAT'S UNIQUE,
WHAT'S BEST FOR OUR UNIQUE
MEMBERSHIP. AND I THINK AS IT
WAS STATED, WE HAVE, MORE OF OUR
MEMBERS REACHING OLDER AND OLDER
AGES. THE LONGEVITY IS
INCREASING. BUT THAT IMPACTS ME
BECAUSE, YOU KNOW, I AM IN
CHARGE OF THE BOTTOM LINE, WHICH
MEANS THAT WE HAVE TO GENERATE
HIGHER RETURNS. AND WHAT THAT
MEANS IS THE INVESTMENT TEAM AT
CALSTRS NEEDS TO GENERATE 7% OR
MORE THAN 7% ANNUALLY. AND
PROBABLY THE MOST IMPORTANT
FACTOR TO THAT. AND WE'VE TALKED
A LITTLE BIT ABOUT THIS IN TERMS
OF WEATHERING DIFFERENT
ENVIRONMENTS IS DIVERSIFICATION.
WE DIVERSIFY OUR ASSET BASE
ACROSS GEOGRAPHIES, ACROSS
ACROSS INDUSTRIES, ACROSS
DIFFERENT TYPES OF SECURITIES,
AND THAT ALLOWS US TO WEATHER
DIFFERENT GLOBAL GDP
ENVIRONMENTS LIKE HIGH HIGH
GROWTH, LOW GROWTH, HIGH
INFLATION, LOW INFLATION, HIGH
INTEREST RATES, LOW INFLATION
AND OBVIOUSLY CRISISES. IF YOU
LOOKED AT HISTORY, WE HAVE MORE
FINANCIAL CRISES THAN ONE WOULD
PREDICT. SO WE NEED TO SURVIVE
ALL THESE THINGS AND
DIVERSIFICATION IS KEY. WE'RE
ALSO CONSTANTLY CONSTANTLY
MONITORING AND IDENTIFYING NEW
RISKS AND ADAPTING TO THE
CHANGING LANDSCAPE. AND TOWARDS
THIS END, WE STRONGLY BELIEVE
THAT CLIMATE CHANGE POSES A
SERIOUS RISK TO THE CALSTRS
INVESTMENT PORTFOLIO AND OUR
ABILITY TO SECURE THE FINANCIAL
FUTURE OF OUR CALIFORNIA
EDUCATORS, OF WHOM MY WIFE OF 30
YEARS MIGHT BE THE MOST
IMPORTANT. BECAUSE IF WE DON'T
DELIVER RETURNS, I MIGHT BE
SLEEPING ON THE COUCH. BUT OUR
ABILITY TO DO THAT IS, YOU KNOW,
CLIMATE CHANGE POSES SUCH A
MATERIAL RISK. AND WHY IS IT SO
MATERIAL? BECAUSE IT'S SYSTEMIC.
IT'S ACROSS GEOGRAPHIES. YOU
KNOW, WE TALKED ABOUT WARS AND,
YOU KNOW, THE RISE OF CHINA. WE
HAVE TO COME TOGETHER IN THIS IN
THIS GLOBAL FIGHT. IT'S ACROSS
ALL INDUSTRIES. IT'S NOT JUST
THE FOSSIL FUEL INDUSTRY, BUT
ALL INDUSTRIES ARE EMITTING
CARBON. AND IT'S ACROSS ALL OF
OUR SECURITIES AND ASSET BASE.
SO IT'S SYSTEMIC AND THAT'S WHY
CASSANDRA BRIEFLY MENTIONED IN
SEPTEMBER 2021, OUR BOARD
RETIREMENT BOARD ADOPTED SCIENCE
BASED GOALS, PLEDGING TO ACHIEVE
NET NET ZERO GREENHOUSE GAS
EMISSIONS ACROSS THE CALSTRS
PORTFOLIO BY 2050 OR SOONER AND
LATER. THEY PLEDGED 50% BY 2030.
SO OUR PLEDGE IS AN ALIGNMENT TO
MEET THE SCIENCE BASED GOALS OF
THE IPCC TO LIMIT GLOBAL WARMING
BY ONE HALF PERCENT, 1.5°C OR
MORE. WITHIN THAT, TO PREVENT
SERIOUS, PLANETARY DAMAGE AND
THE CONSEQUENT SOCIAL AND, AND
ECONOMIC COSTS OF THAT. SO
RECENTLY I WAS TRYING TO EXPLAIN
THE SCALE AND SCOPE OF THIS TO
MY 13 YEAR OLD DAUGHTER. SO I'LL
PROVIDE AN ANALOGY TO YOU IN
2023, THE WORLD EMITTED ROUGHLY
41 GIGATONS OF CARBON DIOXIDE
INTO THE ATMOSPHERE. AND THE
ANALOGY I GAVE MY DAUGHTER IS,
THAT'S LIKE PUTTING 8 BILLION
ELEPHANTS INTO THE ATMOSPHERE.
I'M NOT TALKING ABOUT SMALL
ELEPHANTS. I'M TALKING ABOUT THE
LARGE FIVE TON ELEPHANTS THAT
YOU MIGHT FIND IN AFRICA, AND
THAT 8 BILLION ELEPHANTS NEEDS
TO GO TO ZERO. AND SO, AS
MICHAEL WAS SAYING, WHAT IS THAT
GOING TO TAKE? THAT'S GOING TO
TAKE OVER $200 TRILLION OF
INVESTMENT IN ORDER TO GET
THERE. THAT'S GOT TO BE ONE OF
THE LARGEST INVESTMENT
OPPORTUNITIES AND LARGEST,
INVESTMENT TRENDS THAT I'M GOING
TO SEE IN MY LIFETIME. SO WE
TALKED A LITTLE BIT ABOUT JOB
CREATION. THERE'S GOING TO BE
TREMENDOUS JOB CREATION, BUT
ALSO DISPLACEMENT, RIGHT. IT'S
GOING TO DISPLACE SOME JOBS. SO
THIS HAS TO BE A VERY THOUGHTFUL
TRANSITION. AND WE'RE VERY
MINDFUL OF OUR DIVERSITY EQUITY
INCLUSION WHICH WE INFUSE INTO
ALL THE THINGS WE DO AS WELL AS
HUMAN CAPITAL MANAGEMENT. THOSE
ARE GOING TO BE IMPORTANT KEYS
TO THIS JUST TRANSITION. AND HOW
WE DO BUSINESS. BUT IT'S ALSO
THE REASON WHY TODAY WE HAVE
OVER 50 BILLION IN LOW CARBON
AND TECHNOLOGY SOLUTIONS
INVESTED. AND THAT'S GROWING
RAPIDLY FOR THE CALSTRS
PORTFOLIO, BECAUSE OF THE LARGE
SCOPE AND OPPORTUNITY SET, AS
WELL AS THE SYSTEMIC RISK THAT
WE TALK ABOUT ACROSS
GEOGRAPHIES, INDUSTRIES AND ALL
SECURITIES CALSTRS HAS ADOPTED A
HOLISTIC FRAMEWORK ACROSS THE
TOTAL FUND, AND I'LL BRIEFLY
TOUCH ON THIS. KIRSTY WILL TOUCH
ON IT MORE, BUT IT RESTS ON
THREE PILLARS. ONE IS
DECARBONIZATION, MEANING THAT
WE'RE MANAGING AND REDUCING
EMISSIONS ACROSS THE PORTFOLIO
AND WE'VE TAKEN A VERY RISK
BASED APPROACH. WE CAN GET INTO
MORE DETAIL IN OUR PUBLIC
MARKETS. SECONDLY, IT'S ABOUT
ENGAGEMENT. JUST LIKE CALPERS,
WE'RE INFLUENCING COMPANIES,
FINANCIAL MARKETS AND
POLICYMAKERS TO ADDRESS THE
RISKS OF THE GLOBAL LOW CARBON
TRANSITION. MAINLY, WE'RE TRYING
TO ACCELERATE THAT. WHY? BECAUSE
THE WORLD IS BEHIND. RIGHT.
MICHAEL WAS MENTIONING 1.7
TRILLION OF INVESTMENTS. IT'S
GOT TO BE CLOSER TO SEVEN TO 10
TRILLION A YEAR. AND WE'RE NOT
EVEN NEAR THAT. AND FINALLY,
IT'S ABOUT INCREASING
INVESTMENTS IN CLIMATE
SOLUTIONS. AS I STATED CURRENTLY
50 BILLION AND GROWING FOR THE
FOR THE CALSTRS PORTFOLIO. I'D
JUST LIKE TO END ON A NOTE THAT
WE'VE BEEN AT THIS FOR A LONG
TIME. WE HAVE A LONG STANDING
PROCESS WHERE WE ARE THOROUGHLY
VETTING CLIMATE RISKS AND
CLIMATE SOLUTIONS AND MORE
BROADLY, ENVIRONMENTAL, SOCIAL
AND GOVERNANCE CONCERNS. HOW
LONG WILL WE'VE BEEN? YOU KNOW,
THE BOARD ADOPTED OUR STATEMENT
OF INVESTMENT RESPONSIBILITY ALL
THE WAY BACK IN 1978, SO WE'VE
BEEN HELPING WITH, ALONGSIDE
CALPERS, OUR COLLEAGUES, LEADING
THE CHARGE CHARGE ACROSS THE
INDUSTRY. SO WITH THAT BEING
SAID, I'D LIKE TO HAND IT OFF TO
KIRSTY. GREAT. THANK YOU VERY
MUCH. HELLO, EVERYBODY. MY NAME
IS KIRSTY JENKINSON. I'M THE
DIRECTOR OF SUSTAINABLE
INVESTMENT AND STEWARDSHIP
STRATEGIES. SIS, AS WE PREFER TO
CALL IT, BECAUSE IT'S A BIT
EASIER, AT CALSTRS. THANKS. SO
MUCH FOR LETTING ME BE HERE.
IT'S MY FIRST TIME IN THE
LEGISLATURE, SO I APPRECIATE
THIS OPPORTUNITY. I'M GOING TO
GIVE YOU A LITTLE BIT MORE
DETAIL AND EXAMPLES, HOPEFULLY
ON SOME OF THE INVESTMENT
OPPORTUNITIES THAT WE'RE SEEING
WHEN WE TALK ABOUT THE MASSIVE
TRANSITION THAT OBVIOUSLY OUR
WORLD NEEDS TO ACHIEVE IN THE
NEXT YEARS, IT'S REALLY
IMPORTANT. I THINK, TO FRAME I
THINK MICHAEL AND SCOTT HAVE
ALREADY ALLUDED TO THIS AS WELL,
THAT THIS IS A VERY SIGNIFICANT
OPPORTUNITY SHIFT FOR US. WE SEE
INVESTMENTS ACROSS SECTORS,
ACROSS GEOGRAPHIES, ACROSS ASSET
CLASSES, BOTH PUBLIC AND PRIVATE
MARKETS THAT MEET OUR RISK AND
RETURN GOALS TODAY. AND THAT'S
REALLY IMPORTANT, IF WE THINK
ABOUT, AGAIN, THE NUMBERS THAT
ARE REQUIRED, WE'VE TALKED
YOU'VE HEARD IT FROM BOTH OF MY
COLLEAGUES HERE, YOU KNOW, I CAN
ALSO BRING IT TO LIFE IF YOU
THINK WE NEED 80,000,000KM OF
NEW OR UPGRADED POWER LINES,
JUST TO KIND OF GIVE YOU THAT
VISUAL, THAT'S JUST ONE ELEMENT
OF THE CHANGE THAT WE'RE SEEING
AND WE HAVE TO INVEST IN. AND
WHAT MAKES THIS SO EXCITING. AND
PART OF THE TEAM THAT I RUN AND
THAT WE'RE FOCUSED ON, IS THE
PACE OF CHANGE THAT WE'RE SEEING
IS QUITE EXTRAORDINARY. SO IN
2010, NOT VERY LONG AGO, IT TOOK
A MONTH TO INSTALL, A GIGAWATT
OF SOLAR POWER, LAST YEAR WE
WERE SEEING SINGLE DAYS WHEN A
GIGAWATT OF SOLAR POWER WAS
BEING INSTALLED. AND SO AN
INCREDIBLE PACE OF CHANGE, SO
VERY TIMELY TO BE HAVING THIS
DISCUSSION. ANOTHER GREAT
EXAMPLE IS LAST YEAR, 7% OF
GLOBAL AUTO SALES AROUND THE
WORLD WERE ELECTRIC. THAT WAS UP
FROM 1% IN 2020. SO AGAIN, THIS
IS NOT HAPPENING. SLOWLY. MANY
OF THESE TRANSITIONS, IT IS
HAPPENING RIGHT NOW. SO THE
INVESTMENT OPPORTUNITIES ARE
RIGHT NOW TODAY. SO IN RESPONSE
TO A LOT OF THESE SIGNIFICANT
SHIFTS THAT WE'VE BEEN TALKING
ABOUT, OUR BOARD APPROVED THE
CREATION OF A DEDICATED
PORTFOLIO, KHÓ, TO INVEST IN
CLIMATE SOLUTIONS. AND THIS WAS
THREE YEARS AGO FOR US, AND IT'S
BEEN ONE OF THE FASTEST GROWING
PORTFOLIOS AT CALSTRS. AND I
FEEL FORTUNATE ENOUGH TO OVERSEE
THAT. WE WANTED TO ALLOW OUR
STAFF AND OUR INVESTMENT TEAM
THE OPPORTUNITY TO SUPPLEMENT
THE $17 BILLION OF INVESTMENTS
THAT WE HAVE IN GREEN BUILDINGS
IN OUR REAL ESTATE PORTFOLIO.
SO, OR INVESTMENTS THAT WE HAVE
IN OUR TRADITIONAL
INFRASTRUCTURE PORTFOLIO WHERE
THEY DEVELOP, OWN AND OPERATE
ONE OF THE LARGEST SOLAR AND
BATTERY STORAGE COMPANIES HERE
IN THE US, WITH ABOUT 19MW OF
POWER IN OPERATION, JUST HERE IN
CALIFORNIA, AND ANOTHER 1000MW
OF POWER IN CALIFORNIA ARE ABOUT
TO COME ONLINE. SO THIS
PORTFOLIO WAS VERY INTENTIONALLY
TO SORT OF ACCELERATE THESE
EXISTING INVESTMENTS THAT WE
ALREADY HAVE. WHAT'S FASCINATING
IS THAT WE SEE OPPORTUNITIES ALL
THE WAY FROM VENTURE CAPITAL,
WHICH MANY OF YOU WILL KNOW IS
SORT OF THE HIGHER RISK, HIGHER
RETURN SIDE. THIS IS WHERE YOU
INVEST IN INNOVATIVE, HIGH
GROWTH, DISRUPT OF TECHNOLOGIES
THAT WE ARE GOING TO NEED TO
MEET OUR NET ZERO GOALS. BUT AT
THE SAME TIME, WE'RE SEEING
INVESTMENT OPPORTUNITIES IN
INFRASTRUCTURE INVESTMENTS. YOU
KNOW, THESE ARE THE HEAVY
INFRASTRUCTURE THAT WE'RE GOING
TO HAVE TO HAVE TO SCALE ENERGY
TRANSMISSION AND DISTRIBUTION.
THOSE YOU KNOW, THOSE LINES I
WAS TALKING ABOUT, WE HAVE TO
TRANSFORM OUR TRANSPORTATION
SYSTEM, DECARBONIZE OUR
INDUSTRIAL PROCESSES. SO AGAIN
THINK ABOUT THE INVESTMENT SET
IS FROM VENTURE ALL THE WAY TO,
YOU KNOW, INFRASTRUCTURE. AND WE
HAVE TO DO THIS, AS MANY HAVE
SAID, IN A WAY THAT PROTECTS,
YOU KNOW, AND CREATES JOBS, AND
CONTINUES TO SECURE LIVELIHOODS.
AND THAT TRANSITION IS
INCREDIBLY IMPORTANT. AND WHAT'S
CALLED AND REFERRED TO AS THE
JUST TRANSITION, BECAUSE THERE
WILL BE WINNERS AND LOSERS. AND
WE NEED TO MAKE SURE THAT,
PARTICULARLY WHEN IT COMES TO
PEOPLE, THAT THERE ARE WINNERS
THAT COME OUT OF THIS, WE'VE
ORGANIZED A DEDICATED CLIMATE
SORT OF ACCELERANT PORTFOLIO
THAT I'M DESCRIBING VERY
INTENTIONALLY SO THAT WE CAN
BOTH INNOVATE BECAUSE WE NEED TO
HAVE INNOVATION, BUT ALSO SCALE.
AND THAT SPEAKS REALLY TO WHAT,
YOU KNOW, WE'VE BEEN TALKING
ABOUT THE SCALE OF THE PENSION
FUNDS REPRESENTING IN FRONT OF
YOU TODAY, AS THE TWO LARGEST
PENSION FUNDS IN THE US. WE HAVE
TO ACKNOWLEDGE THAT SCALE THAT
WE HAVE. SO I'M GOING TO GIVE
YOU, IF THIS IS ALL RIGHT,
PERMIT ME, BECAUSE I THINK IT'S,
PERHAPS, YOU KNOW, REALLY
EXCITING TO ME AT LEAST. AND A
NUMBER OF THE INVESTMENTS THAT
WE'RE INVESTING IN, JUST TO
REALLY SORT OF GIVE YOU SOME
TANGIBLE EXAMPLES, AND I THINK
IT HIGHLIGHTS WHAT WE DO BEST,
WHICH IS TO INVEST TO PROTECT
THE RETIREMENT SECURITY OF THE 1
MILLION TEACHERS THAT CASSANDRA
WAS TELLING YOU ABOUT. SO LET ME
FIRST DESCRIBE A COUPLE OF THE
VENTURE INVESTMENTS. WHAT DOES
THAT MEAN, WE HAVE ONE
CALIFORNIA BASED PARTNER, WHICH
I'M DELIGHTED IS ALSO RUN BY TWO
DIVERSE, INDIVIDUALS AS WELL
THAT ARE INVESTING IN DISRUPTIVE
, DEEP TECHNOLOGIES THAT CAN
MATERIALLY CHANGE AN INDUSTRY.
THEY HAVE RADICALLY BETTER UNIT
ECONOMICS. SO THESE COST LESS,
AND THEY HAVE PROFOUND
ENVIRONMENTAL BENEFITS AS WELL.
AND THEY INTERSECT. YOU KNOW,
THE INVESTMENT IS REALLY
UNDERSTANDING THE PHYSICS AND
IT'S UNDERSTANDING FINANCE. SO
IT'S A BATTERY AND BATTERY
RECYCLING AND MANUFACTURING
COMPANY WHERE 99% OF THE
MATERIALS ARE RECYCLED. THE
COSTS ARE 35% CHEAPER THAN
VIRGIN METHYL METAL CATHODES.
AND THEY HAVE 32% FEWER
EMISSIONS. THAT'S A TANGIBLE
VENTURE INVESTMENT IN OUR
PORTFOLIO. ANOTHER ONE IS AN
ELECTRIC MOTORCYCLE AND BUS
COMPANY BUILT FOR RUGGED ROAD
CONDITIONS THAT'S BEEN USED
CURRENTLY IN PARTS OF AFRICA. WE
KNOW THE EMERGING WORLD ALSO HAS
TO DECARBONIZE AND LEAPFROG
TECHNOLOGIES THAT WE ARE
CURRENTLY USING IN OTHER PARTS
OF THE WORLD. THIS COMPANY IS
PROVIDING VEHICLES THAT ARE TWO
TIMES CHEAPER THAN SECONDHAND
FOSSIL FUEL ALTERNATIVES, AND
THEY HAVE 80% FEWER EMISSIONS.
AGAIN, VERY CLEAR UNDERSTANDING
OF COST AND ENVIRONMENTAL
BENEFITS. IF WE MOVE SLIGHTLY
DOWN THE SORT OF THE RISK RETURN
SPECTRUM TO THINKING ABOUT SOME
OF THE INFRASTRUCTURE
INVESTMENTS THAT WE HAVE IN OUR
PORTFOLIO, WE'VE JUST
ESTABLISHED A STRATEGIC
PARTNERSHIP WITH ONE OF THE
LARGEST SUSTAINABLE
INFRASTRUCTURE COMPANIES AND
OPERATING PLATFORMS BASED HERE
IN, IN SAN FRANCISCO AND IN
CALIFORNIA. IT PROVIDES FINANCE
FOR SUSTAINABLE POWER,
SUSTAINABLE MOBILITY AND
SUSTAINABLE WATER AND WASTE. AND
THEY'RE CREATING A JOINT VENTURE
WHICH IS QUITE CLOSE TO ALL OF
OUR HEARTS TO ACCELERATE THE
ADOPTION OF ELECTRIC SCHOOL
BUSSES ACROSS THE US. THEY'RE
ALSO WORKING WITH WALMART TO
DECARBONIZE ITS STORES AND ITS
SUPPLY CHAIN. SO THINK ABOUT
BOTH OF THOSE EXAMPLES. WHEN WE
THINK ABOUT SCALE, THE NUMBER
OF, YOU KNOW, BUS, SCHOOL BUSSES
ON THE ROADS IN OUR COUNTRY, THE
NUMBER OF WALMART STORES AND THE
REACH OF THEIR SUPPLY CHAIN,
THESE ARE THE KIND OF
INVESTMENTS THAT REALLY CAN HAVE
A VERY TANGIBLE BUT COST
EFFECTIVE BENEFIT ON OUR ECONOMY
AND ON OUR ENVIRONMENT. AND THEN
THE THIRD AREA I WANT TO REALLY
HIGHLIGHT IS IN A PLATFORM
PARTNERSHIP THAT WE MADE LAST
YEAR THAT WE'VE CREATED WITH AN
ORGANIZATION THAT'S REALLY DOING
WHAT I THINK IS PERHAPS SOME OF
THE TOUGHEST STUFF OUT THERE.
IT'S THE HARDEST TO ABATE
SECTORS. THAT MEANS REALLY WHERE
IT'S WHERE IS IT REALLY TRICKY
TO PULL AND REDUCE CARBON
EMISSIONS? IT'S AREAS LIKE STEEL
MANUFACTURING, CEMENT, THIS
GROUP THAT WE'RE PARTNERING WITH
HAS MADE ONE OF OUR FIRST
INVESTMENTS IN ITS FIRST OF ITS
KIND, LARGE SCALE GREEN STEEL
PLANT PRODUCING STEEL WITH GREEN
HYDROGEN, WHICH IS 95% LOWER
CARBON INTENSITY. AGAIN,
INCREDIBLY IMPORTANT. WE HAVE TO
DECARBONIZE STEEL. WE HAVE TO
SHOW THAT THESE INNOVATIONS CAN
BOTH BE COST EFFECTIVE AND
REDUCE EMISSIONS. AND SECONDLY,
AN AREA THAT WE'RE REALLY
SPENDING QUITE A LOT OF TIME
WITH THIS GROUP LOOKING AT IS
NATURAL CLIMATE SOLUTIONS. IT
CANNOT BE UNDERESTIMATED. WE
NEED TO DECARBONIZE THE
INDUSTRIAL ECONOMY, BUT WE ALSO
NEED TO THINK ABOUT THESE NEW
FRONTIERS, WHICH ARE
REGENERATIVE AGRICULTURE, FOREST
RESTORATION, CONSERVATION,
CARBON MEASUREMENT AND
VERIFICATION, DURABLE CARBON
REMOVALS WHERE CARBON IS STORED
IN NATURAL FORMATIONS. AGAIN, IF
YOU THINK ABOUT THE WONDERS OF
WE HAVE HERE IN CALIFORNIA, HOW
WE THINK ABOUT THIS NATURAL
CLIMATE SOLUTIONS IS SOMETHING
THAT WE AS INVESTORS NEED TO
SCALE UP OUR INVESTMENTS IN AS
WELL. WITH THE BEST AND
BRIGHTEST THAT WE HAVE IN THE
ACCESS TO. SO THAT'S A LITTLE
SUMMARY OF SOME OF THE
INVESTMENTS THAT WE'RE MAKING.
I'M GOING TO SPEND A LITTLE BIT
SHORTER TIME JUST ALSO TOUCHING
ON THE TWO OTHER ELEMENTS OF
OUR, STRATEGY THAT SCOTT ALLUDED
TO AROUND NET ZERO. THE SECOND
IS WE ARE INVESTING IN
SOLUTIONS, BUT AT THE SAME TIME
WE HAVE TO REDUCE EMISSIONS
ALREADY IN OUR PORTFOLIO, IN OUR
EQUITY PORTFOLIO, WHICH IS
ACTUALLY THE LARGEST PART OF OUR
CALSTRS PORTFOLIO, WE'RE
IMPLEMENTING AN EMISSIONS
REDUCTION STRATEGY. WE'VE
ALLOCATED 20% OF OUR TOTAL
PUBLIC EQUITY PORTFOLIO. THAT'S
$25 BILLION TO A LOW CARBON
INDEX. THAT'S WHERE WE OWN MORE
LOWER EMITTING COMPANIES. AND
LESS HIGHER EMITTING COMPANIES
WITHIN A RISK BUDGET THAT WE ARE
COMFORTABLE AND, YOU KNOW,
ALIGNED WITH OUR OVERALL GOALS.
WE'RE CURRENTLY SHIFTED ABOUT
15% OF THAT PORTFOLIO. THIS IS
ONE OF THE MOST SIGNIFICANT
TRADES THAT WE'VE MAKE. SO WE
CAN'T DO IT OVERNIGHT. IT HAS TO
BE LEGGED INTO WE DO NOT WANT TO
MOVE THE MARKET TO OUR
DETRIMENT, BUT RIGHT NOW THIS
HAS ALREADY YIELDED PORTFOLIO
EMISSIONS REDUCTIONS OF MORE
THAN 10, WITH MORE TO COME.
SIMILARLY, IN OUR BOND
PORTFOLIO, OUR TEAM IS
IMPLEMENTING AN EMISSIONS
REDUCTION STRATEGY AGAIN ALIGNED
WITH THEIR RISK AND RETURN
GOALS, WHERE WE'VE REDUCED OUR
BOND PORTFOLIO EMISSIONS BY 11%
ALREADY, WE'RE ALSO WORKING VERY
HARD TO TRY AND MEASURE MEASURE
OUR EMISSIONS BETTER. YOU MIGHT
HAVE SEEN SOME RECENT PRESS ON
ON SOME OF THE CHALLENGES THAT
WE AND OTHER INVESTORS FACE IN
MEASURING EMISSIONS AND GETTING
BETTER DATA. THIS IS TOUGH, BUT
IT'S GOING TO GET BETTER AND
IT'S GOING TO GET EASIER. AND
DISCLOSURE STANDARDS THAT
CALIFORNIA AND THE REST OF THE
WORLD IS MOVING TOWARDS IS GOING
TO HELP US GET BETTER AT BEING
ABLE TO TRACK AND UNDERSTAND
THIS ANALYSIS LIKE WE CAN
FINANCIAL DATA. SO THAT'S A
LITTLE BIT ABOUT HOW WE'RE
REDUCING EMISSIONS. AND FINALLY,
LAST BUT NOT LEAST, TO TOUCH ON
AGAIN SOME OF THE THEMES THAT
WERE ALREADY TALKED ABOUT
BEFORE. WE HAVE A ROLE TO PLAY
WITHIN THE BROADER FINANCIAL
MARKETS. WE HAVE INFLUENCE, WE
HAVE A NAME AND WE HAVE ASSETS
AND WE HAVE SCALE THAT CREATES
CHANGE. IF YOU THINK ABOUT WHERE
THE WORLD IS TODAY, 88% OF THE
WORLD'S EMISSIONS, 89% OF ITS
POPULATION AND 92% OF GDP ARE
NOW COVERED BY NET ZERO TARGETS.
THAT'S EXTRA ORDINARILY PROFOUND
LEVEL OF COMMITMENT. WE NOW NEED
TO MAKE SURE THAT THOSE
COMMITMENTS FROM COMPANIES AND
FROM POLICYMAKERS AROUND THE
GLOBE ARE ACTUALLY BEING
IMPLEMENTED IN LINE WITH WHAT
THEY HAVE COMMITTED TO DOING,
OURSELVES INCLUDED. AND
THEREFORE, THERE'S THIS
ACCOUNTABLE K¾T, WHICH IS REALLY
KEY FOR US TO USE OUR INFLUENCE
TO ENSURE THAT THAT IS
HAPPENING. SO HOW WE USE OUR
INFLUENCE WITH OUR PARTNERS,
WITH THE COMPANIES AND THE
ASSETS THAT WE INVEST IN, IS
GOING TO HELP US ACHIEVE OUR NET
ZERO PLEDGE. AND WE'RE GETTING
BETTER DATA FROM COMPANIES, WE
NEED MORE OF IT THOUGH. SO WE'RE
SUPPORTING THE INTERNATIONAL
SUSTAINABILITY STANDARDS BOARD,
THE SEC, UNFORTUNATELY, WITH ITS
CHALLENGED RULE, TO PROVIDE US
WITH BETTER DISCLOSURE, THESE
ARE THE KIND OF AREAS WHERE WE
NEED TO SEE CHANGE AND WE CAN
USE OUR INFLUENCE. AND WE'RE
ALSO, AGAIN, NOT LEAST WITH OUR
COLLEAGUES AT CALPERS, THE
CLIMATE ACTION 100 PLUS
INITIATIVE TO FOCUS ON THE
HIGHEST EMITTERS IN THE WORLD IS
A VERY CRITICAL PART OF WHERE WE
CAN USE OUR SHARED ENGAGEMENT
WITH COMPANIES TO REDUCE
EMISSIONS TANGIBLY. AND I'M
GOING TO BRING UP ONE FINAL
EXAMPLE, WHICH I THINK IS REALLY
IMPORTANT WHEN WE THINK ABOUT
HIGH EMITTING INDUSTRIES AND
WHERE YOU CAN REDUCE CARBON THE
FASTEST AND THE QUICKEST, IT'S
METHANE MITIGATION. I SHOULD SAY
MY BRITISH ACCENT DOESN'T HELP
ME, BUT METHANE, I THINK IS. SO
FORGIVE ME, IT MIGHT NEED A BIT
OF TRANSLATION, METHANE IS A
GREENHOUSE GAS, THAT'S 28 TIMES
AS POTENT AS CARBON DIOXIDE AT
TRAPPING HEAT IN THE ATMOSPHERE.
BUT ITS ATMOSPHERIC LIFETIME IS
ONLY 12 YEARS COMPARED TO
CENTURIES FOR CARBON DIOXIDE.
SOME METHANE EMISSIONS COME FROM
NATURAL SOURCES, BUT MANY ARE A
PRODUCT OF HUMAN ACTIVITIES, NOT
LEAST FROM THE OIL AND GAS
SECTOR AND ALSO FROM
AGRICULTURE. SO A LOT OF OUR
ENGAGEMENT AND OUR INFLUENCE
WORK IS FOCUSED ON REDUCING
METHANE EMISSIONS. THEY'RE
RESPONSIBLE FOR 30% OF CURRENT
RISING GLOBAL TEMPERATURES. BUT
THEY CAN BE TRACKED AND THEY CAN
BE REDUCED IN A COST EFFECTIVE
WAY. SO AGAIN WHEN WE THINK
ABOUT HIGH EMITTING SECTORS,
WHEN WE THINK ABOUT THE OIL AND
GAS, WHEN WE THINK ABOUT
METHANE, WE NEED TO GET METHANE
OUT OF THE ATMOSPHERE AS QUICKLY
AS WE CAN AND IN A COST
EFFECTIVE WAY. WE ARE
INFLUENCING COMPANIES TO DO
THAT. WE ARE SEEING TANGIBLE
CHANGE. WE ARE SEEING
REDUCTIONS, AND THAT'S REALLY,
REALLY IMPORTANT. ENGAGEMENT
DOES WORK AND IT DOES REDUCE
EMISSIONS. SO IN SUMMARY, I HOPE
I'VE GIVEN YOU A FEW FLAVORS OF
THE OPPORTUNITY THAT WE SEE IN
FRONT OF US. THEY ARE IMMENSE.
WE HAVE TO DO IT THOUGHTFULLY.
WE HAVE TO DO IT CAREFULLY, HOW
WE'RE REDUCING EMISSIONS IN OUR
PORTFOLIO, BUT ALSO HOW WE'RE
USING THE INFLUENCE THAT WE AS A
COLLABORATIVE OF TWO FUNDS DO TO
HAVE A CHANGE THAT WE NEED TO
SEE. SO THANK YOU SO MUCH FOR
THE CHANCE TO SPEAK TO YOU ALL.
THANK YOU GUYS SO MUCH, FOR
COMING TODAY. AND LET'S BRING IT
BACK TO THE COMMITTEE. ANY
QUESTIONS? YES. ASSEMBLY MEMBER
BERNER. THANK YOU. THANK YOU FOR
YOUR PRESENTATION. IT'S
ENCOURAGING THAT YOU'RE LOOKING
AT REDUCTION IN GREENHOUSE
GASES. AND IT'S INTERESTING THAT
YOU WERE TALKING ABOUT HOW DO
YOU EXPLAIN CLIMATE CHANGE AND
THE IMPACT OF CLIMATE CHANGE,
WHAT WE HAVE TO DO FOR OUR KIDS.
MY MOM IS A TEACHER AND SHE'S IN
CALSTRS AND I HAVE TWO KIDS, 13
AND 16, AND WHEN I THINK ABOUT
IT, WE HAVE THIS DILEMMA IN
FRONT OF US, AND IT'S BASICALLY
PITTING TWO GENERATIONS AGAINST
EACH OTHER. IT'S MY MOM AS A
TEACHER AND MY CHILDREN AND THE
PLANET THEY HAVE TO INHERIT FROM
US. AND SO WHEN I LOOK AT IT,
IT'S GREAT THAT YOU'RE LOOKING
AND IT SOUNDS LIKE YOU HAVE LOTS
OF INITIATIVES AND YOU PUT LOTS
OF THOUGHT AND TIME INTO THIS.
BUT THE NUMBER ONE WAY YOU COULD
REDUCE EMISSIONS IS TO DIVEST
FROM FOSSIL FUELS. WE KNOW THEY
CAUSE EMISSIONS. WE KNOW THEY'RE
PART OF THE REASON. AND THE BIG
PART OF THE REASON THAT OUR KIDS
ARE NOT GOING TO HAVE THE PLANET
THAT WE GREW UP WITH. SO HOW DO
YOU KIND OF BALANCE MY MOM,
PUTTING MY MOM AGAINST MY
CHILDREN'S FUTURE? BECAUSE
THAT'S BASICALLY THE CONUNDRUM
THAT WE HAVE. WELL, I REALLY
APPRECIATE YOUR VIEW. MEMBER.
BERNER. BERNER. SO YEAH, I, I
CAN TELL YOU REALLY ENGAGED IN
THIS. BOTH PERSONALLY AND
PROFESSIONALLY. AND WE ARE AS
WELL, SO I REALLY RESPECT THAT.
AND I APPRECIATE YOUR VIEWPOINTS
, WE SEE IT IN A DIFFERENT WAY.
AND I THINK WHILE WE'RE IN THIS
FIGHT TOGETHER, I THINK WE COULD
HAVE DIFFERENT VIEWPOINTS ON IT,
SO WHEN IT COMES TO DIVESTMENT,
IT IS A TOOL THAT WE CONSIDER
USING ACROSS THE PORTFOLIO. IT'S
AN INVESTMENT TOOL, BUT IT'S NOT
A PREFERRED TOOL, NUMBER ONE, WE
DON'T BELIEVE THAT IF WE
DIVESTED FROM FOSSIL FUELS THAT
THAT WOULD SOLVE THE EMISSIONS
PROBLEM. RATHER, IT'S THE $200
TRILLION OF INVESTMENTS THAT THE
WORLD NEEDS TO MAKE IN ORDER TO
DECARBONIZE THE WORLD. RIGHT? SO
THAT'S ONE. THE OTHER IS AND I
DON'T THINK OF THIS AS A
GENERATIONAL ISSUE PER SE,
BECAUSE WE, YOU KNOW, WE'RE ALL
WORKING TOWARDS MAKING SURE THAT
THE NEXT GENERATION IS JUST AS
EQUITABLE. PREVIOUS ONES. BUT I
DO SEE IT. I WOULD I WOULD CALL
IT THE TWO D'S DIVERSIFICATION,
FROM THE INVESTMENT PORTFOLIO
STANDPOINT, VERSUS DIVESTMENT.
AND, YOU KNOW, FOR US, WE BEGAN
WITH DIVERSE DIVERSIFICATION AS
A IS A REAL KEY ONCE YOU START
ELIMINATING ASSETS OR SECURITIES
FROM THAT AVAILABLE UNIVERSE,
YOU WILL BE TAKING ON MORE RISK.
JUST THAT'S THE MATH. AND
THEORETICALLY, OVER THE LONG
TERM, THE PROBABILITY IS THAT
YOU'LL GENERATE LESS RETURNS.
AND SO IN THE HISTORY OF
CALSTRS, WE'VE DIVESTED, SIX
TIMES. AND THAT'S COST ROUGHLY
9.5 BILLION. THE OPPORTUNITY GAP
IN TERMS OF THE RETURNS LOST
NOW, THE PROBABILITY
DISTRIBUTION IS NOT 100. IT
COULD HAVE FELL EITHER WAY. WE
COULD HAVE MADE MONEY OR LOST
MONEY. BUT THE MATH IS CERTAINLY
IT'S LIKE BETTING AGAINST THE
CASINO. THE MATH IS CERTAINLY
AGAINST YOU, AND SO THAT'S,
THAT'S ANOTHER REASON, THE OTHER
ISSUE. AND WE DESCRIBED THIS, IS
THAT THIS IS A SYSTEMIC RISK.
IT'S NOT JUST THE FOSSIL FUEL
INDUSTRY. IT'S ESSENTIALLY ALL
THE INDUSTRIES. AND SO WE NEED
TO MAKE SURE THAT THIS
TRANSITION IS OCCURRING ACROSS
ALL, ALL OF THE DIFFERENT
INDUSTRIES. AND I THINK A VERY
INTERESTINGLY, AS AS KIRSTIE WAS
MENTIONING, AS WE WERE
DECARBONIZING OUR PUBLIC EQUITY
PORTFOLIO THROUGH INVESTING IN
THIS LOW CARBON INDEX, WE FOUND
THAT DOING THAT ACROSS ALL
INDUSTRIES HAD A GREATER EFFECT
IN DECARBONIZING OUR PORTFOLIO
AT MUCH LOWER RISK. BUT
CONVERSELY, IF WE DIVEST FROM
FOSSIL FUELS, IT HAD A
SIGNIFICANTLY LESS
DECARBONIZATION EFFECT. AND AT A
MUCH GREATER RISK TO OUR
PORTFOLIO. AND I'M JUST TRYING
TO EXPLAIN THAT THIS IS AN ALL
INDUSTRY, ALL GEOGRAPHY, ALL
SECTOR FOCUS. FOR US. IT'S ALL
SECURITIES. ONE COULD DIVEST IN
FOSSIL FUELS AND STILL DO ALL
THE OTHER THINGS. I'M SORRY,
ASSEMBLYMEMBER, WE AT THE
BEGINNING OF THE, AT THE, AT THE
BEGINNING OF THE HEARING, WE
KIND OF WENT OVER SOME OF THE SO
WE'LL HAVE THIS DISCUSSION AS WE
HAVE OUR HEARING ON, ON, ON, ON,
SENATOR GONZALEZ'S BILL. SORRY,
ARE THERE ANY MORE QUESTIONS?
ASSEMBLY MEMBER? LACKEY. YEAH.
EXCUSE ME. I JUST WANTED TO,
THANK THE PRESENTERS FOR
VALIDATING A VERY, VERY, I
THINK, CRITICAL POINT IS THAT,
FOCUSING ON INVESTMENTS, THAT
CONTRIBUTE TO EMISSION
REDUCTIONS IS, MUCH MORE
RESPONSIBLE THAN POLITICALLY
DIVESTING. THAT LIKELY PUTS
FIDUCIARY BENEFITS AT AN
UNNECESSARY RISK. I MEAN, AS AS
YOU INDICATED, THE OIL INDUSTRY
IS ADAPTING. THEY HAVE TO THE
ECONOMIC CONDITIONS THAT HAVE
BEEN, SET AND THE PUBLIC POLICY
THAT HAS BEEN ESTABLISHED IS
FORCING THEM TO DO SO. AND SO
DIVESTING FROM THOSE INDUSTRIES
MAKES THEM LESS ABLE TO DO THAT.
AND SO IT'S ALL PART OF THE
PARTNERSHIP. AND MOVING TOWARDS
A GREENER, A MORE,
ENVIRONMENTALLY FRIENDLY
ATMOSPHERE. AND SO I'M THANKFUL
FOR YOUR THE POINTS THAT YOU'RE
MAKING IS THAT LET'S ALLOW YOU
GUYS TO, MAKE THE FINANCIAL
INVESTMENTS INSTEAD OF,
THWARTING THE PROGRAM BY TRYING
TO INSERT DIVESTMENTS. THANK
YOU, ASSEMBLY MEMBER HARDT, I
REALLY APPRECIATE, THE, THE
INPUT FROM THE PANEL ACROSS THE
BOARD DESCRIBING YOUR GLOBAL
STRATEGIES FOR BOTH OF THE
SYSTEMS TO INCREASE INVESTMENTS
IN FOSSIL FREE ALTERNATIVES.
THERE'S GREAT OPPORTUNITY THERE.
YOU DESCRIBED THAT REALLY WELL.
AND THEN ALSO TO ENGAGE AND USE
YOUR MARKET POWER WITH THE
COMPANIES THAT AREN'T, MOVING AS
FAST AS YOU'D LIKE. AND STEP
THREE, YOU TALK ABOUT A PROCESS
WHERE YOU CONSIDER, YOU KNOW,
DISINVESTMENT. IF THERE ISN'T
ENOUGH SUCCESS IN THAT REGARD,
YOU KNOW, AND THEN USING
MEASUREMENT TOOLS TO SEE AND
RECALIBRATE HOW THIS IS ALL
WORKING AND THE TIME, THE
HEARING TODAY IS VERY TIMELY
BECAUSE, AND THIS QUESTION, I
THINK, IS FOR MR. COHEN OR MISS
FROST, THE LAWSUIT THAT EXXON
FILED IN FEDERAL COURT TO
EFFECTIVELY SILENCE ACTIVIST
INVESTORS IS A DIRECT THREAT TO
YOUR ENGAGEMENT STRATEGY. AND
THEN I THINK THE NEWS TODAY IS
THAT THE EXXON INVESTORS HAVE
REJECTED THE MOVE THAT YOU MADE
TO VOTE AGAINST THE BOARD OF
DIRECTORS. SO, YOU KNOW, WE HAVE
A CLEAR EXAMPLE OF A COMPANY
THAT IS WORKING ACTIVELY AGAINST
ENGAGEMENT. YOU KNOW, WHAT IS
THE NEXT STEP FOR CALPERS IN
THAT PROCESS? MARCI, YOU WANT TO
TAKE THAT ONE? SURE. YEAH, I CAN
START. AND THEN MICHAEL, IF YOU
WANT TO ADD ANYTHING AT THE END,
PLEASE FEEL FREE TO DO SO. SO
THANK YOU VERY MUCH FOR THAT
QUESTION. AND AGAIN IT'S ONE OF
THE REASONS I'M ACTUALLY HERE IN
NEW YORK IS TO TALK ABOUT THE
RATIONALE BEHIND AND OUR, YOU
KNOW, OUR DECISION TO VOTE
AGAINST THE ENTIRE EXXON BOARD
AND OTHER ASSET OWNERS AND
MANAGERS AND SOVEREIGN WEALTH
FUNDS, FELT THE SAME WAY THAT WE
DID THAT THIS LITIGATION, EVEN
AFTER THE PROPOSAL WAS REMOVED
BY, YOU KNOW, THE TWO ACTIVIST
FUNDS. AND I WANT TO BE REALLY
CLEAR THAT CALPERS AND CALSTRS
ARE NOT ACTIVISTS. WE ARE ACTIVE
OWNERS. BUT THE LITIGATION IS
VERY TROUBLING TO US. AND AS YOU
PROBABLY NOTICED AS WELL, THE
TEXAS COURT HAS ALLOWED THAT
LITIGATION TO PROCEED EVEN
THOUGH THAT PROPOSAL WAS
WITHDRAWN. SO NEXT STEPS FOR
CALPERS. WE WILL ACTIVELY
MONITOR THIS LITIGATION, THERE
MAY BE AN OPPORTUNITY FOR US TO
FILE A BRIEFING IN THIS CASE,
BUT THIS IS SOMETHING THAT WILL
CONTINUE TO MONITOR, I THINK THE
FACT THAT IT GOT THE ATTENTION
THAT IT DID, IT SHOWS THAT, YOU
KNOW, A SHAREHOLDER VOICE LIKE A
CALPERS OR CALSTRS. IT IS
MEANINGFUL, THE INTENTION OF
PUTTING TRANSPARENCY OR PUTTING
A SPOTLIGHT ON THIS LITIGATION
WASN'T REALLY TO UNSEAT THE
EXXON BOARD. I THERE WASN'T
ANOTHER SLATE OF DIRECTORS BEING
RUN FOR THIS ANNUAL MEETING, BUT
IT WAS MORE A VERY CLEAR
COMMUNICATION THAT WE SEE THIS
AS AN ABSOLUTE FAILURE IN
GOVERNANCE AND GOVERNANCE. IS
THE RESPONSE ABILITY OF THE
ENTIRE BOARD. BUT WE WILL
MONITOR THIS AND MAKE DECISIONS
ABOUT WHAT NEXT STEPS WE MAY
NEED TO TAKE. WELL, AND I DON'T
EXPECT YOU TO EXPLAIN TODAY WHAT
THOSE NEXT STEPS ARE, BUT I DO
THINK THAT THIS INCIDENT IS,
CLEARLY DEMONSTRATES THE LIMITS
OF THE ENGAGEMENT STRATEGY IN
CERTAIN CIRCUMSTANCES WITH
PARTICULAR COMPANIES AND THEIR
UNWILLINGNESS TO CHANGE THEIR
BUSINESS PRACTICES TO
EFFECTIVELY ENGAGE WITH CALPERS
ON THE AGENDA THAT YOU HAVE. AND
I THINK IT IT IT IS SOMETHING
THAT'S EXTREMELY TROUBLING. AND,
YOU KNOW, I DON'T KNOW IF THAT
SAME APPROACH IS ADVOCATED BY
THE OTHER MAJOR OIL INDUSTRIES,
BUT I THINK IT'S PROBABLY
IMPORTANT TO TEST THAT STRATEGY
IN THAT SECTOR TO KNOW EXACTLY
WHAT THE RESPONSE FROM THE
COMPANIES WOULD BE. YEAH. AND I
WOULD JUST SIMPLY ADD THAT THE,
YOU KNOW, WE COULDN'T REACH
AGREEMENT, OBVIOUSLY, WITH
EXXON, OUR TEAM IS ENGAGED WITH
THEM. I PERSONALLY HAVE ENGAGED
WITH THE CEO, BUT WE DO HAVE
VERY ACTIVE ENGAGEMENT ON THE
CLIMATE SIDE. WE THINK THAT
THOSE HAVE BEEN, YOU KNOW,
BROADLY, ACCEPTED AND WE HAVE A
CLEAR UNDERSTANDING OF WHAT
EXXON IS PLANNING TO DO ON
TRANSITION AROUND REDUCTION IN
CARBON INTENSITY. SO THIS IS NOT
OUR ENGAGEMENT AS AN INVESTOR IN
THIS COMPANY. THIS WAS TO MAKE
CLEAR VERY CLEAR THAT SUING
SHAREHOLDERS IS NOT SOMETHING
THAT WE, TOLERATE. WELL, I
APPRECIATE YOU DRAWING THE
DISTINCTION BETWEEN THE LAWSUIT
AND YOUR ENGAGEMENT, BUT THE
LAWSUIT IS A DIRECT ATTACK
AGAINST ENGAGEMENT, AND I THINK
IT CAN'T BE. YOU'VE DESCRIBED IT
AS SUCH. AND I THINK THE, THE
ONLY THING I WOULD ADD IS, OUR
ENGAGEMENT ON THE CLIMATE SIDE
CERTAINLY DON'T ALWAYS YIELD
IMMEDIATE RESULTS. IT'S NOT AS
IF YOU WALK IN THE ROOM, HAVE
ONE CONVERSATION AND THE COMPANY
SAYS, OH, WE'VE BEEN, YOU KNOW,
THINKING ABOUT THIS ALL WRONG.
LET'S HAVE HAVE A CHANGE. SO I
THINK THERE IS A LEVEL OF
PATIENCE IN THE ENGAGEMENT
PROCESS. BUT I ABSOLUTELY SHARE
YOUR CONCERNS ABOUT THE
UNDERLYING PROCESS OF ENGAGEMENT
IS UNDER ATTACK HERE THROUGH
THIS LAWSUIT. NO. THANK YOU.
ASSEMBLY MEMBER FOR AND,
PANELISTS FOR CLARIFYING. AND I
JUST WANT TO SAY, IT SEEMS THAT,
PENSION FUNDS ARE GETTING A
LITTLE TASTE OF WHAT COMMUNITIES
THAT HAVE BEEN LIVING NEXT TO
THESE OIL REFINERIES HAVE BEEN
GETTING FOR YEARS. AND, AND
WHATEVER THE LEGISLATURE CAN DO,
I THINK VOICE IS IMPORTANT
EVERYWHERE, ESPECIALLY IF THEY
ARE DEFENDING, THE INTENTIONS
AND THE WILL OF THE PEOPLE OF
CALIFORNIA AND SO WHATEVER THE
LEGISLATURE CAN DO TO SUPPORT
YOU IN THIS EMERGING, WHAT COULD
BE AN EMERGING STANCE OF THE
INDUSTRY? WE CERTAINLY WANT TO
BE A SUPPORT, I DID HAVE SOME
QUESTIONS, MR. COHEN, GOING BACK
TO YOUR PRESENTATION WHERE YOU
TALKED ABOUT THE THREE
STRATEGIES OF INVESTING IN
CLIMATE SOLUTIONS, THE
MITIGATION, ADAPTATION AND THE
TRANSITION. AS YOU MENTIONED,
THE GOAL IS TO GET TO $100
BILLION. WE'RE AT 40, 47, HOW
DOES THE PERCENTAGE OF INVEST OF
YOUR DOLLARS IN IN TERMS OF YOUR
STRATEGY, WHERE AND HOW DOES
THAT SHIFT, CLEARLY, ENGAGEMENT
SOUNDS LIKE IT'S A MAJOR FOCUS
NOW. AND SO IT LOOKS LIKE THIS.
YOU KNOW, THESE ARE THESE MAKE
SENSE. BUT AS YOU SEE THE
ENVIRONMENT CHANGING, HOW WILL
YOU ADAPT AND WHAT HOW DO YOU
UTILIZE AND INVEST TIME AND
ENERGY AND RESOURCES IN THESE
THREE STRATEGIES OVER TIME?
SURE. I THINK THE ANSWER IS THAT
IT'S GOING TO EVOLVE OVER THE
NEXT SIX YEARS AS WE MOVE TO
2030, AND ENGAGEMENT IS KIND OF
AN OVERLAY IN ALL OF THOSE
AREAS, BUT ULTIMATELY, WE
APPROACH ALL OF THESE
INVESTMENTS FROM AN INVESTMENT
STANDPOINT. SO WE'RE GOING TO GO
TO WHERE WE THINK WE CAN EARN AT
LEAST AS MUCH, IF NOT MORE MONEY
FROM, FROM, AN INVESTMENT IN ONE
OF THESE THREE BUCKETS COMPARED
TO THE REST OF THE PORTFOLIO. MY
INSTINCT IS THAT TRANSITION, AS
I TALKED ABOUT IT, PROVIDES THE
GREATEST OPPORTUNITY FOR, THE
LARGEST CHECKS AND, YOU KNOW,
THE BIGGEST INVESTMENTS. SO MY
GUESS IS BY 2030, THAT'S GOING
TO BE AN AREA WHERE YOU'LL SEE
THE GREATEST INCREMENTAL
INVESTMENTS. BUT WE'RE STILL
SORT OF, DEVELOPING THESE
STRATEGIES. AND YOU'LL CERTAINLY
SEE ALL THREE OF THE BUCKETS,
GROW OVER THE NEXT FIVE, SIX
YEARS. I APPRECIATE THAT. I'M
ASSUMING WE WILL GET THAT UPDATE
AS WE HAVE THESE REGULAR
SESSIONS TO CHECK IN ON THE
SHIFT, THE OTHER QUESTION I HAVE
IS, IS MORE OF A GENERAL
QUESTION IN, IN ANYONE FEEL FREE
TO ANSWER ON CLIMATE CHANGE. YOU
YOU ADDRESSED CRITICS WHO ARGUE
THAT PENSION FUND ESG
INITIATIVES PERMIT COMPANIES TO
CLOAK THEMSELVES IN SOME SORT OF
A PUBLIC RELATIONS GREEN WASHING
CAMPAIGN THAT SHIELDS THEM FROM
REAL EFFORTS TO GET TO NET ZERO.
WHY SHOULD WE EXPECT SHAREHOLDER
ENGAGEMENT TO WORK TO ELIMINATE
CARBON EMISSIONS BETTER THAN
STARVING THOSE INDUSTRIES? AND
WHEN WE SAY STARVING, MEANING
STARVING THEM OF CAPITAL, AND
COULD THAT BE DIRECTED TO
DEVELOP MORE ALTERNATIVE ENERGY
SOURCES MORE QUICKLY. YEAH AND I
DON'T THINK IT'S AN EITHER OR
THAT WE'RE CERTAINLY, AS YOU'VE
HEARD, INVESTING IN ALL OF THOSE
ALTERNATIVES. BUT THE REALITY
IS, IF WE PULLED OUR MONEY
TODAY, SOMEONE ELSE IS GOING TO
PROVIDE AN EQUAL AMOUNT OF
CAPITAL TOMORROW. SO I DON'T
THINK WALKING AWAY FROM THE
TABLE DOES ANYTHING OTHER THAN
WHY WOULD EXXON OR ANY OTHER
FOSSIL FUEL COMPANY EVEN RETURN
OUR PHONE CALL WHEN WE'RE NOT A
SHAREHOLDER? SO THAT
FUNDAMENTALLY IS THE CORE ISSUE
THAT WE NEED TO BE INVOLVED. AND
THE REPORT IN YOUR PACKET, I
THINK ANSWERS FROM AN ACADEMIC
PERSPECTIVE THAT THE ENGAGEMENT
PROCESS IS ACTUALLY MAKING A
DIFFERENCE, THAT BY ENGAGING WE
ARE REDUCING EMISSIONS AND IT
CERTAINLY DOESN'T HAVE THE SAME
SORT OF SATISFACTION OF, OH, WE
DUMPED EVERYTHING. AND NOW WE'RE
CLEAN. BUT IT'S MUCH MORE
EFFECTIVE LONG TERM. YEAH AND
MAYBE JUST ADD TO MICHAEL'S
COMMENTS, IT'S ABOUT
ACCOUNTABILITY. IF YOU THINK
ABOUT OUR GLOBAL STOCK
PORTFOLIO, WE OWN, YOU KNOW,
OVER 6000 STOCKS. WE OWN THE
WORLD. AND SO IT'S OUR JOB TO,
YOU KNOW, MEASURE AND MONITOR,
UNDERSTAND THEIR PLANS AND HOLD
THEM ACCOUNTABLE WHEN THEY'RE
ACTUALLY GREENWASHING, WHEN
THEY'RE NOT, THEY'RE NOT
ACTUALLY EXECUTING THOSE PLANS.
WE'RE GOING TO END UP BECAUSE
WE'RE SO LARGE. WE'RE GOING TO
END UP OWNING THEIR THEIR STOCK
REGARDLESS. AND IF WE DIVEST
FROM THEM, IT SENDS A MESSAGE.
AND IT'S SOMETHING THAT'S IN THE
TOOLBOX THAT WE CONSIDER. BUT
IT'S SOMETHING THAT WOULD ALSO
THEN START TO WORK INTO OUR
DIVERSIFICATION EFFORTS AS WELL.
ON THE FLIP SIDE, AS AS
FIDUCIARIES. SO IT'S A DIFFICULT
DECISION FOR US. BUT I WOULD SAY
FIRST AND FOREMOST IS ABOUT
ACCOUNTABILITY. IF WE'RE NOT
GOING TO HOLD THEM ACCOUNTABLE,
WHO WHO WILL HOLD THEM
ACCOUNTABLE AND WHAT, YOU KNOW,
WE TALKED ABOUT EXXON, WHAT THE
BOARD SAY IT THE MOST OBVIOUSLY
IS WHEN YOU VOTE AGAINST THEM.
THAT THAT'S THAT'S THE THAT'S
THAT'S OUR RIGHT. THAT'S THAT'S
THAT'S HOW WE ARE GOING TO HOLD
THEM ACCOUNTABLE AS WELL AS
DIALOGING WITH THEM EXTENSIVELY.
OUR TEAM IS, IS, IS ENGAGING
WITH THEM AND TALKING THROUGH
THEIR PLANS AND REALLY PUTTING,
YOU KNOW, SOME HOPEFULLY SOME
SOME DECENT PRESSURE ON THEM TO
UNDERSTAND WHAT ARE THE BEST
PRACTICES IN OTHER COMPANIES
THAT WE SEE. YOU KNOW, SO THIS
IS SOMETHING THAT WE, YOU KNOW,
FIRST AND FOREMOST REALLY HOPE
TO ENGAGE THEM. BUT MORE
IMPORTANTLY, HOLD THEM
ACCOUNTABLE AND SHINE A LIGHT ON
THAT. SO THAT, YOU KNOW, THE
WORLD KNOWS WHO WHO'S ACTUALLY
DOING IT. AND WE'RE FORTUNATE
BECAUSE WE HAVE A FULL TEAM TO
DO IT. WE KNOW WHO IS
GREENWASHING AND WE KNOW WHO IS
NOT. AND YOU NEED EXPERTS TO DO
THAT. BUT THAT'S ALSO SOMETHING
IN THE US, AS THE TWO LARGEST
PENSION FUNDS WE HAVE THOSE
TEAMS. AND SO WE CAN HOLD PEOPLE
ACCOUNTABLE AND SHINE THAT LIGHT
WHERE OTHERS MAY NOT HAVE THAT
TYPE OF EXPERTISE, THAT MIGHT
HAVE SMALLER TEAMS AND OR NOT
ABLE TO HAVE THE DEDICATION AND
FOCUS THAT WE ARE NO, I
APPRECIATE THAT APPROACH BECAUSE
IT IS A DELICATE BALANCE. I
THINK YOU OPENED, SHARING JUST
WHO YOUR MEMBERS ARE, AND I KNOW
LARGELY WOMEN OF COLOR, WHO WERE
FORTUNATE ENOUGH TO GET A GOOD
GOVERNMENT JOB THAT GAVE THEM A
SAFETY NET. AND YOU'RE HOLDING
THAT IN THE BALANCE WITH YOU
KNOW, THIS SHIFTING, CRISIS AND
HOLDING THESE COMPANIES
ACCOUNTABLE. AND HOW DO YOU HOW
DO YOU DO THAT IN A WAY, IS
CERTAINLY A CHALLENGE, BUT ONE
THAT I THINK, IS IMPORTANT. AND
THAT'S WHERE I WANT TO GO TO IN
TERMS OF HOW YOU FRAME THE, THE
IDEA OF FINANCIAL RISK TO
PENSIONS AND WONDERING JUST AT,
AT ONE WHAT POINT AND I THINK
YOU ANSWERED THIS A BIT, MR.
COHEN, BUT AT WHAT POINT POINT
DO WE CONTINUE TO HOLD THESE
INVESTMENTS WITH HIGH CARBON
EMITTING COMPANIES, THAT VIOLATE
THE FUNDS THAT THAT WOULD
POTENTIALLY VIOLATE THE FUND'S
FIDUCIARY DUTY? RIGHT. BECAUSE
BECAUSE YOU TALKED ABOUT THE
IMPACT OF CLIMATE CHANGE JUST IN
TERMS OF FLOODING AND FIRES AND
WILDFIRES. RIGHT. AND THEN YOU
ALSO HAVE THIS, YOU KNOW, THE
TRANSITION THAT IS POSSIBLE THAT
WE SHOULD ACCELERATE. BUT AT
WHAT POINT DO YOU SAY, OKAY, WE
HAVE TO REALLY LOOK AT THIS
ISSUE BECAUSE ON THIS END, IN
TERMS OF THE IMPACT OF CLIMATE
ON OUR INVESTMENTS, IT'S NOT
IT'S NOT OUTWEIGHING. I MEAN,
WE'RE TALKING ABOUT THE
INSURANCE CRISIS WE HAVE IN
CALIFORNIA, FOR EXAMPLE. RIGHT.
SO AT WHAT POINT DOES IT
OUTWEIGH, THE ACTUAL, DAMAGE TO
OUR ENVIRONMENT, TO OUR WORKERS
PENSIONS WHEN WE HAVE CLIMATE
CHANGE THAT IS WREAKING HAVOC ON
EVERY SINGLE PROJECT THAT WE
HAVE, BECAUSE, FRANKLY, SOME
PARTS OF THE COUNTRY AND THE
WORLD JUST AREN'T INHABITABLE
BECAUSE OF THE SHIFTS IN OUR
CLIMATE. SO HOW HOW DO YOU WHERE
DOES THE AND I KNOW THAT'S A
CRYSTAL BALL, BUT HOW DO YOU
HOLD RIGHT THAT THAT REALITY AND
WHAT IS THE TRIGGER TO SAY WE
CAN NO LONGER DO THIS BECAUSE AS
YOU KNOW, I MEAN, MADAM, MADAM
CO-CHAIR, YOU ANSWERED, YOU
ASKED THE RIGHT AND MOST
DIFFICULT QUESTION AND SOMETHING
WE GRAPPLE WITH BECAUSE WE ARE
FIGHTING THIS DIVERSIFICATION
VERSUS DIVESTMENT. RIGHT? WE
KNOW THAT THROUGH
DIVERSIFICATION, WE'RE BETTER
ABLE TO SECURE THE RETIREMENT
FUTURE OF OUR OVER 1 MILLION
TEACHERS, RIGHT. BUT WE ALSO
KNOW THAT DIVESTMENT, IT'S NOT
GOING TO BRING DOWN THE
EMISSIONS. WHAT'S REALLY GOING
TO BRING DOWN THOSE EMISSIONS IS
THE $200 TRILLION OF INVESTMENTS
THAT NEED TO BE MADE, AND WHICH
WERE BOTH JOINTLY MAKING THOSE
INVESTMENTS AND USHERING THAT,
YOU KNOW, SORT OF INTO THE
WORLD. BUT AT A CERTAIN POINT,
AS WE ENGAGE ORGANIZATIONS AND
WE BELIEVE THAT THESE ENERGY
COMPANIES, THEY'RE PART OF THAT
TRANSITION, RIGHT? THEY THEY
NEED TO DEVELOP A PLAN TO GO
FROM WHERE THEY ARE TODAY TO,
YOU KNOW, MAYBE MORE RENEWABLE
COMPANY, FOR EXAMPLE, IN THE
FUTURE. AND A LOT OF THOSE
ORGANIZATIONS LEAD THE WORLD,
RIGHT? SO IF THEY HAVE THE
TECHNOLOGIES THAT ARE DEVELOPING
AND THEN THEY'LL LEAD THE WORLD
IN THAT. SO THE ENGAGEMENT HAS A
MORE POWERFUL EFFECT. HOWEVER,
AT CERTAIN AT A CERTAIN POINT,
WE HAVE TO PROBABLY ASSESS, YOU
KNOW, AN ENGAGEMENT. WE'VE
ENGAGED THIS ORGANIZATION AND WE
PRACTICE A TACTIC OF PROGRESSIVE
ENGAGEMENT. RIGHT. SO AT FIRST
WE'LL BE CALLING YOU
UNDERSTANDING YOUR PLANS,
ENGAGING ING. THEN WE'RE GOING
TO BE ASKING FOR YOU TO, YOU
KNOW, DO MORE, MAYBE CREATE THE
RIGHT BOARD STRUCTURE, THE RIGHT
INFRASTRUCTURE FOR TELL US WHAT
YOUR PLANS ARE THEN. ARE YOU
MAKING THE RIGHT INVESTMENTS.
AND THEN WE START TO ESCALATE
THAT TO, YOU KNOW, IF THEY'RE
NOT LISTENING, VOTING AGAINST
THE BOARD AND OTHER ESCALATION
TACTICS, THE FAR END OF THAT,
AND THIS IS WHAT WE GRAPPLE
WITH, IS ON SPECIFIC COMPANY BY
COMPANY BASIS, WE MIGHT NEED TO
SAY, YOU KNOW, WE'VE DONE WE'VE
ESCALATED TO THE FURTHEST POINT.
AND NOW WE HAVE TO CONSIDER THAT
TOOL. BUT THAT'S SOMETHING THAT
THAT WE REALLY GRAPPLE WITH.
GIVEN THE DIVERSIFICATION AND
THE AREAS OF RISK THAT WE
DISCUSSED, AS WELL AS THE
POTENTIAL FOR THEM TO LEAD TO
THE TECHNOLOGY PART OF THIS
TRANSITION FORWARD. CHRISTY, I
DON'T KNOW IF YOU HAVE. I WAS
JUST GOING TO BRING IT BACK AS
WELL TO SORT OF A REALLY, YOU
KNOW, POINT OF HOW WE THINK
ABOUT IT IS, IS WE HAVE A
LIMITED TIME TO CREATE A
REDUCTION IN EMISSIONS AND WE IN
OUR INDIVIDUAL LIVES, IN OUR
ROLES THAT WE PLAY IN THE
ORGANIZATIONS THAT WE REPRESENT
ARE TRYING TO FIND THE MAXIMUM
WAY TO HAVE THE GREATEST IMPACT,
BOTH IN REDUCING EMISSIONS AND
ACHIEVING THE GOALS THAT WE HAVE
TO FOR OUR PLANS. AND HONESTLY,
THAT'S WHERE WE HAVE TO FOCUS
OUR ATTENTION. THERE IS A LOT OF
NOISE AND THERE IS A LOT OF
DISTRACTION AND THERE IS A LOT
OF PEOPLE WANTING LOTS OF
DIFFERENT ELEMENTS. WE INVEST
AND WE MAKE GOOD INVESTMENT
DECISIONS. WE CAN DEPLOY CAPITAL
TO SOLUTIONS. WE HAVE TO STAY
RIGOROUSLY FOCUSED ON THAT
BECAUSE THAT'S WHERE WE BELIEVE
WE CAN HAVE THE SINGLE BIGGEST
IMPACT ON THE CLIMATE CRISIS.
AND SO I THINK IT'S JUST ALWAYS
BRINGING IT DOWN TO THERE ARE
MANY OTHER ACTORS, THERE ARE
POLICYMAKERS WHO NEED TO PLAY A
ROLE. THERE ARE GLOBAL
GOVERNMENTS WHO NEED TO SET A
PRICE ON CARBON. WE CAN
INFLUENCE THAT. BUT WHERE WE CAN
HAVE THE GREATEST IMPACT IS
TODAY IN REDUCING EMISSIONS IN
TECHNOLOGIES AND IN COMPANIES
AND IN HOLDING BIG COMPANIES
ACCOUNTABLE TO SHOW A CLEAR
TRANSITION PATH. AND IT'S ALL
ABOUT BEING VERY CLEAR ABOUT
WHAT OUR ROLE IS AND WHERE OUR
GREATEST IMPACT CAN BE. AND I
THINK WE'VE TRIED TO DESCRIBE
THAT TO, YOU KNOW, I APPRECIATE
THAT. AND I REALLY APPRECIATE
THAT ACCOUNTABILITY PIECE AND
THAT YOU'RE IN THAT
CONVERSATION, ON A, ON A REGULAR
BASIS. AND THIS IS MY LAST
QUESTION, THAT THERE WAS A
RECENT STUDY FROM THE RESEARCH
AND ADVOCACY GROUP OIL CHANGE
INTERNATIONAL, EXAMINED THE
CLIMATE PLANS FOR EIGHT OF THE
LARGEST US, US AND EUROPEAN
BASED OIL AND GAS PRODUCERS. AND
I THINK YOU REFERENCED THIS,
THIS IN ONE OF YOUR EARLIER
PRESENTATIONS, BP AND CHEVRON,
CONOCO PHILLIPS, ENI, EQUINOR
AND EXXONMOBIL, SHELL AND TOTAL
ENERGIES AND FOUND THAT NONE
WERE COMPATIBLE. RIGHT? WITH THE
UN GOAL LIMITING, FOR GLOBAL
WARMING TO 1.5. HOW CAN ANY
CLIMATE PLAN ADOPTED BY HIGH
EMITTING COMPANIES BE SEEN AS A
VICTORY? AND HOW DO YOU, AS YOU
SAY, CONTINUE TO KEEP YOUR
FINGER ON THE PULSE OF
ACCOUNTABILITY? MOVING FORWARD?
JUST JUST HOW DO YOU DO THAT?
AND AGAIN, WHAT IS THE SORT OF
TRIGGER FOR THE FINAL STEP AS
YOU MENTIONED, JUST MAYBE I'LL
START OFF WITH AGAIN, LIKE I
MENTIONED, I TALKED ABOUT
METHANE, YOU KNOW, AND I TALKED
ABOUT WHY THAT IS SUCH A
SIGNIFICANT PART OF A NGUYEN
THAT WE CAN HAVE JOINTLY. THERE
ARE OIL COMPANIES THAT WE KNOW
AND OTHER FORMS OF AGRICULTURE
AS WELL THAT IS EMITTING METHANE
. I DESCRIBED TO YOU WHY THAT
WAS SUCH A POTENT GREENHOUSE GAS
AND ONE THAT DOESN'T LIVE AS
LONG. SO AGAIN, IT'S ABOUT, YOU
KNOW, THE BIGGEST IMPACT, ONE OF
THE BIGGEST IMPACTS WE CAN HAVE
IS TO REDUCE THOSE METHANE
EMISSIONS. TODAY. WE CAN DO THAT
BY INVESTING IN SATELLITE
TECHNOLOGY THAT WILL TRACK
METHANE EMISSION LEAKAGES. THAT
WILL GIVE US ALL CLARITY AROUND
WHERE IT IS COMING FROM, SO THAT
WE CAN THEN ENSURE THAT THOSE
COMPANIES ARE HELD ACCOUNT FOR
REDUCING THEM. WE CAN ALSO DO IT
BY ENCOURAGING THOSE COMPANIES
TO JOIN PROTOCOLS AND JOIN
INITIATIVES TO REDUCE IT AND
CAPTURE IT. THEY ARE DOING THAT.
SO AGAIN, I'M THINKING ABOUT THE
TIME VALUE THAT WE HAVE. WE
DON'T HAVE A LOT OF TIME. WHERE
IS THE BIGGEST OPPORTUNITY FOR
US TO REDUCE ITS IN AREAS LIKE
THAT. AND SO I PERSONALLY DON'T
WANT TO WALK AWAY FROM THAT
OPPORTUNITY TO REDUCE A VERY
SIGNIFICANT SOURCE OF GLOBAL
EMISSIONS. SO THAT'S ONE VERY
SPECIFIC EXAMPLE. BUT I THINK
MORE BROADLY THE ACCOUNTABILITY
AND OTHERS HAVE DONE AMAZING
WORK WITH THEIR LEADERSHIP ON ON
CLIMATE ACTION 100 PLUS HERE,
THERE'S A BENCHMARK THAT
BENCHMARKS THE PROGRESS OF ALL
OF THE COMPANIES. IT'S PUBLIC.
IT'S OUT THERE. EVERYBODY CAN
SEE THAT WE ARE WE'RE NOT DOING
THIS SORT OF, YOU KNOW, IT'S
VERY TRANSPARENT. WE HAVE A
SYSTEM TO BENCHMARK THE PROGRESS
OF THE TRANSITION OF THE HIGHEST
EMITTING COMPANIES IN THE GLOBE,
AND WE HAVE TRILLIONS OF DOLLARS
OF ASSETS HOLDING THOSE
COMPANIES TO ACCOUNT. THAT'S
GREAT. WE DIDN'T HAVE THAT FIVE
YEARS AGO. AND SO IT'S
ORGANIZATIONS AND GROUPS LIKE
THAT THAT ARE AVAILABLE FOR THE
PUBLIC TO SEE THAT WILL ALLOW US
TO BASE OUR INFORMATION AND OUR
INVESTMENT AND ALSO HAVE A
VOICE. THANK YOU. AND JUST TO
ADD ONE MORE THOUGHT, I THINK IT
IS A LOT OF HARD WORK AND IT'S
COMPANY BY COMPANY, NOT,
INDUSTRY WIDE, THAT TO THE
EXTENT YOU'RE GOING TO HAVE
PROGRESS, IT'S GOING TO BE ON AN
INDIVIDUAL ENGAGEMENT WITH AN
INDIVIDUAL COMPANY. NOT
NECESSARILY ENGAGING AN ENTIRE
INDUSTRY IS MUCH MORE DIFFICULT
THAN SITTING DOWN WITH WITH ONE
COMPANY. NOT EVERY OIL AND GAS
COMPANY IS THE SAME. SOME OF
THEM ARE GOING TO RECOGNIZE THAT
THE WORLD IS CHANGING, AND
THERE'S FINANCIAL OPPORTUNITIES
IN THE CHANGE. AND THOSE ARE THE
ONES THAT WE'RE GOING TO WORK
WITH. THE CLOSEST AND THOSE THAT
DON'T HAVE A CREDIBLE SCIENCE
BASED PLAN TO ADDRESS CLIMATE.
EVENTUALLY WE WILL, YOU KNOW,
MOVE AWAY FROM. BUT IT'S NOT
GOING TO BE AN INDUSTRY WIDE
APPROACH. IT WILL BE THAT
SPECIFIC COMPANY BY COMPANY
ANALYSIS. WELL THANK YOU FOR
TAKING YOUR FIDUCIARY
RESPONSIBILITY. SO SERIOUSLY AND
KEEPING THIS BODY INFORMED. AND
WE WILL CONTINUE TO WORK
TOGETHER TO MAKE SURE THAT WE
REACH THAT BALANCE THAT WE NEED.
SO APPRECIATE YOUR TESTIMONY
TODAY. THANK YOU. THANK YOU.
SENATOR, A LOT OF MY QUESTIONS
WERE ANSWERED. THAT'S WHY IN THE
BEGINNING, WHEN I SAID WE SHOULD
JUST, WRITE DOWN, YOU KNOW, WAIT
TO ASK OUR QUESTIONS, I'M THE
LAST ONE THAT GETS TO ASK
QUESTIONS. SO I THINK SMALLWOOD,
CUEVAS AND SOME OF THE OTHER
MEMBERS ASK MOST OF THE
QUESTION. I AM A RETIREE. I WORK
FOR, THE LA COUNTY MOST OF MY
CAREER, OVER 25 YEARS, AND I AM
VERY HAPPY THAT I GET MY
RETIREMENT EVERY MONTH, SO THANK
YOU, CALPERS, I'M ALSO HAPPY TO
HEAR ABOUT THE DIVERSITY AND
INVESTMENT THAT YOU GUYS ARE
DOING AROUND CLIMATE CHANGE,
BECAUSE WITH I KNOW THAT WE WITH
THE FOSSIL FUEL AND OUR ELECTRIC
CARS IS ONE SPACE. BUT I'M GLAD
TO HEAR ABOUT RECYCLING BECAUSE
THAT'S ONE OF MY, PET PEEVES IS
I KNOW THAT WE NEED TO DO A LOT
OF RECYCLING. SO I'M HEARING
THAT YOU GUYS ARE DIVESTING,
INVESTING IN THE BATTERY
RECYCLING AND ELECTRIC BUSSES
AND INFRASTRUCTURE. I CANNOT
WAIT TO READ ABOUT THE GREEN
STEEL PLANTS, BECAUSE THAT
SOUNDS VERY INTERESTING, SO IT'S
A LOT OF SPACES WHERE WE CAN GO
IN AND WE CAN COMBAT CLIMATE
CHANGE. SO I'M GLAD TO HEAR
ABOUT THE DIVERSITY THAT YOU
GUYS HAVE, IN YOUR INVESTMENT
INVESTING OF MY MONEY, HOW MY
LAST QUESTION IS, HOW IS OR HOW
WILL DIVERSITY OF INVESTMENT
MANAGERS INTEGRATE INTO YOUR
CLIMATE INVESTMENT STRATEGY? I
THINK THIS IS REALLY AN AREA
WHERE THE LEGISLATURE HAS BEEN
OF GREAT ASSET, YOU YOU PASSED
AB 890, A COUPLE OF YEARS AGO
THAT REQUIRES BOTH OF US TO
REPORT ANNUALLY ON OUR DIVERSE
AND EMERGING MANAGERS. AND SO IT
REALLY GIVES US A TOOL TO, BE
HELD ACCOUNTABLE FOR OUR
COMMITMENT TO DIVERSITY, EQUITY
AND INCLUSION. AND I THINK ON
OUR ANNUAL REPORTING FOR OUR
SUSTAINABLE 2030 PLAN, ONE OF
OUR, KEY PERFORMANCE INDICATORS
IS THE AMOUNT OF MONEY WE'RE
PUTTING TOWARDS, DIVERSE AND
EMERGING MANAGERS, BECAUSE IN
OUR INVESTMENT THESIS, WE
BELIEVE THAT, USING SOME OF THE
MANAGERS THAT HAVEN'T ALWAYS
BEEN GIVEN AN OPPORTUNITY ARE
CRITICAL, TO, TO OUTPERFORMING
OUR TRADITIONAL BENCHMARKS. SO
WE THINK ANNUALLY WE'RE GOING TO
WE'RE GOING TO SEE THAT NUMBER
CONTINUE TO GO UP. OUR FIRST
REPORT HAD OVER $7 BILLION OF
DIVERSE AND EMERGING MANAGER,
COMMITMENTS. AND I EXPECT THAT
NUMBER IS GOING TO CONTINUE TO
RISE OVER TIME BECAUSE WE ARE
ABSOLUTELY INTEGRATING THE
OPPORTUNITY THROUGHOUT OUR
SUSTAINABILITY REPORT AND,
FINDING OPPORTUNITIES, WE PUT $1
BILLION, LAST YEAR INTO A
PLATFORM THAT WILL BE PROVIDING
OUR BOARD AN UPDATE IN OUR JULY
OFFSITE. AND IN A COUPLE OF
MONTHS IN TERMS OF GETTING THE
DOLLARS OUT. BUT THERE, THAT
BILLION DOLLARS, I THINK, IS
GOING TO START TO WORK. AND MANY
OF THOSE INVESTMENT
OPPORTUNITIES ARE GOING TO
OVERLAP WITH THE INVESTMENT
OPPORTUNITIES THAT WE'VE BEEN
TALKING ABOUT TODAY IN TERMS OF,
SUSTAINABILITY, BECAUSE THIS
REALLY IS THE GROWTH INDUSTRY
FOR THE NEXT 20 YEARS THAT THE
ENTIRE WORLD IS TRYING TO FIGURE
OUT HOW TO TRANSITION OUR
ECONOMY. AND SO THERE'S
TREMENDOUS OPPORTUNITIES. AND,
MICHAEL, I IF I COULD, IF I
COULD JUST ADD ONE ITEM. SO IT
IS A CRITICAL PART OF OUR,
SUSTAINABLE INVESTING 2030 PLAN.
BUT I THINK WHAT I'M REALLY
PROUD OF IS JUST THE ALLOCATION
OF CAPITAL IN OUR PRIVATE EQUITY
PROGRAM, WHICH IS A PART OF THE
890 REPORT AND A PART OF THE $7
BILLION IN COMMITMENTS. BUT 4
BILLION OF THE 10 BILLION
COMMITMENTS OVER ABOUT AN 18
MONTH PERIOD OF TIME WENT TO
DIVERSE MANAGERS. AND THAT WAS
SIMPLY BECAUSE WE CHANGED THE
ENTRY POINT OR THE CHANGE, THE
WAY THAT WE INVESTED IN PRIVATE
EQUITY. WE MOVED AWAY FROM SO
MUCH CONCENTRATION AND MEGA
BUYOUT FUNDS AND BROUGHT IT DOWN
INTO THE MID-MARKET SPACE. AND
THAT'S WHERE WE SEE SIGNIFICANT
OPPORTUNITIES FOR DIVERSIFYING
OUR CAPITAL. SO I THINK YOU WILL
SEE THAT IN OUR 890 REPORT. BUT
I FELT REMISS AND NOT AT LEAST
PUTTING THAT ONTO THE RECORD AS
WELL. THANK YOU. MAYBE WE CAN
TAG TEAM A LITTLE BIT OF THE
RESPONSE FROM CALSTRS. BUT, I'M
REALLY I APPRECIATE THE QUESTION
. I'M REALLY PASSIONATE ABOUT
DIVERSITY, EQUITY, INCLUSION, MY
PARENTS WERE IMMIGRANTS HERE,
AND SO THEY CAME HERE TO HAVE
THE CHILDREN BORN IN A FREE
COUNTRY, WHICH I'VE CERTAINLY
BENEFITED FROM, BUT I GET TO BE
IN A ROLE NOW WHERE DRIVING
ACCOUNTABILITY ACROSS OUR
PLATFORM IS ONE OF MY TOP ROLES.
AND SO AT CALSTRS, YOU KNOW,
IT'S A TOP THREE, BUSINESS
PRIORITY FOR US IN THE
INVESTMENT TEAM, SO AN ALL THE
DIVISIONS, BUSINESS PLANS, IT'S
WOVEN INTO NOT ONLY FROM AN
INTERNAL PERSPECTIVE, BUT AS WE
LOOK TO ALL OF OUR PARTNERSHIPS
AS WELL, SECONDLY, I HAVE TO SAY
40% OF OUR LEADERSHIP IS
INVOLVED IN THIS AS WELL. SO
IT'S NOT JUST, HEY, IT'S PART OF
HR OR IT'S PART OF, YOU KNOW,
ONE PERSON'S DUTY. WE'VE ALSO
HIRED DEDICATED RESOURCES AS,
AND ALL OF THIS HAS LED TO WHAT
WE CALL OUR DIVERSITY INVESTMENT
MANAGEMENT STRATEGY, WHICH
ESSENTIALLY HAS THREE PILLARS.
ONE OF IS ONE OF THEM IS
INTERNAL. I THINK YOU'VE HEARD
BEFORE US COME BEFORE YOU THAT
WE'RE TRYING TO BRING MORE AND
MORE OF OUR ASSETS TO MANAGE
IN-HOUSE BECAUSE THERE'S
TREMENDOUS COST SAVINGS WHEN WE
DO THAT. OVER THE LAST FIVE
YEARS, WE SAVE ROUGHLY $1.6
BILLION IN ESTIMATED FEES, WHICH
HAS BEEN TREMENDOUS FOR THE
TEACHERS. SO WE'RE TRYING TO
ENSURE THAT OUR TEAM, OUR TEAM
OF MANAGERS IS DIVERSE, AND
WE'VE GOT THINGS TO WORK ABOUT.
BUT, YOU KNOW, FORTUNATELY, YOU
KNOW, IF I GAVE YOU SOME OF THE
STATS, I THINK IT'D BE FAIRLY
IMPRESSIVE CONSIDERING WHERE WE
ARE. MAYBE 50% OF OUR STAFF IS
WOMEN BY GENDER, AND, 56% OR SO
IDENTIFY AS ETHNICALLY DIVERSE.
AND SO WE CONTINUE TO BUILD ON
THAT. SECONDLY, IT'S ABOUT
ENGAGEMENT. SO KIRSTY IS LEADING
THE CHARGE THERE. WE ENGAGE
CORPORATIONS, WHY? BECAUSE JUST
LIKE CLIMATE CHANGE, IT'S ONE OF
THE BIGGEST OPPORTUNITIES
DIVERSE TEAMS OUTPERFORM. RIGHT.
SO WE WANT TO MAKE SURE THAT ALL
OF THE COMPANIES, PUBLIC OR
PRIVATE, WE'RE ENGAGING THEM ON
ON THOSE ISSUES. AND THAT'S PART
OF THE HUMAN CAPITAL MANAGEMENT
PLAN ACROSS ALL OF INVESTMENTS,
INCLUDING THE CLIMATE SOLUTIONS.
AND FINALLY, AS MICHAEL WAS
MENTIONING, YOU KNOW, WE'VE BEEN
INVESTING, PROBABLY STARTED
INVESTING IN DIVERSE AND
EMERGING MANAGERS ROUGHLY 30
YEARS AGO AT CALSTRS. SO, AGAIN,
WE'VE BEEN AT THIS FOR A VERY
LONG TIME, JUST SOME QUICK STATS
. AS YOU SEE IN AB 280, AS WE'VE
BEEN STARTING TO DEFINE THAT, WE
DID ABOUT 4.5 BILLION OF
COMMITMENTS LAST YEAR IN PRIVATE
EQUITY. THAT'S MORE THAN 12% OF
THE TOTAL COMMITMENTS WE WERE
MAKING. SO PRETTY SIGNIFICANT
AMOUNT. AND YOU CAN LOOK AT THE
REPORT, FOR FURTHER INFORMATION.
BUT THAT SPILLS ALL THE WAY INTO
SUSTAINABILITY AND OUR CLIMATE
INVESTMENTS. AND KIRSTY, I
WANTED TO TALK ABOUT SOME OF THE
SOME OF THE RECENT INVESTMENTS.
YOU'VE COVERED MOST OF IT, BUT I
THINK IT'S REALLY INTERESTING
THAT AS MARCY SAID, AS WELL, A
NUMBER OF THE NEW FIRMS THAT
WE'RE INVESTING IN ARE BY THE
VERY NATURE LED BY DIVERSE
MANAGERS. AND IT'S REALLY
EXCITING. THEY'RE SMALLER BUYOUT
FIRMS, THEY'RE SMALLER GROUPS OF
VENTURE FIRMS AS WELL. AND I
THINK THERE'S A REALLY
INTERESTING, YOU KNOW, FLOOD OF
CAPITAL AND TALENT FROM DIVERSE
BACKGROUNDS AND EXPERIENCES
COMING INTO THIS PARTICULAR
AREA. AND SO IT'S A REAL
OPPORTUNITY TO SEE THAT SORT OF
THE CONVERGENCE. I ALSO LOOK AT
SOME OF THE OTHER INVESTMENTS
THAT WE'VE MADE. YOU MENTIONED
EARLIER ABOUT, YOU KNOW, SOUTH
CENTRAL, WE HAVE A SORT OF A
REALLY INTERESTING INVESTMENT
THAT WE MADE IN SOUTH CENTRAL LA
TO CREATE AFFORDABLE HOUSING.
AND JUST YESTERDAY THEY RAN A
MASSIVE CONVENTION IN SOUTH
CENTRAL LA WITH THE GREEN
BUILDING COUNCIL THERE, BECAUSE
THEY'RE TRYING TO BRING, YOU
KNOW, AFFORDABILITY AND GREEN
BUILDING CREDENTIALS TOGETHER.
AND IT'S JUST VERY, VERY
EXCITING TO SEE THE CONVERGENCE
OF THESE TWO INCREDIBLY
IMPORTANT PRIORITIES TO SORT OF,
YOU KNOW, CREATE THE WORLD THAT
WE WANT TO LIVE IN. THANK YOU.
THANK YOU GUYS. WELL, THAT WAS
MY LAST QUESTION. AND I'D LIKE
TO THANK YOU GUYS SO MUCH FOR
COMING AND SPEAKING WITH US
TODAY. I LOOK FORWARD TO WORKING
WITH YOU GUYS. I LOOK FORWARD TO
READING THE NEXT REPORT THAT
COMES OUT IN NOVEMBER, AND SO
THANK YOU GUYS. THERE ARE NO
FURTHER QUESTIONS FROM THE DAIS,
WE WILL TAKE PUBLIC COMMENT. WE
HAVE 20 MINUTES, BUT WE WE'RE
GOING TO START WITH SENATOR
GONZALEZ. SHE'LL COME FORWARD.
I'M SORRY. WE'LL DO AFTER
SENATOR GONZALEZ WILL HAVE
PUBLIC COMMENT. BUT THANK YOU
GUYS SO MUCH. APPRECIATE IT.
THANK YOU. THANK YOU. OKAY. YEAH
YEAH YEAH. WELCOME. SENATOR
GONZALEZ. THANK YOU, MADAM
CHAIRS. ALL RIGHT. SO REALLY,
JUST FIRST AND FOREMOST WOULD
LIKE TO THANK YOU EACH FOR THE
OPPORTUNITY TO BRIEFLY ADDRESS
THE JOINT HEARING. OF COURSE, ON
AN ISSUE THAT'S BEEN VERY
IMPORTANT TO ME, BUT ALSO TO THE
MANY TEACHERS, FIREFIGHTERS,
STATE AND LOCAL EMPLOYEES WHO
ARE FIGHTING TO ENSURE THEIR
PENSIONS ARE SAFE FROM CLIMATE
RELATED RISKS. AND I WOULD ALSO
LIKE TO THANK THE HARD WORKING
STAFF AT CALPERS AND STIRS.
THEY'VE BEEN WORKING VERY
CLOSELY WITH MY OFFICE,
INCLUDING THEIR LEADERSHIP AND
BOARD MEMBERS WHO ARE WORKING
TIRELESSLY TO ENSURE A STRONG
RETIREMENT FUTURE FOR THEIR
MEMBERS. AND I'M ALSO PLEASED TO
SEE MANY OF OUR PENSION SYSTEMS
HERE TODAY. BOTH OF OUR PENSION
SYSTEMS HERE TODAY, CONTINUING
THEIR ONGOING COMMUNICATION WITH
THE LEGISLATURE ON OUR SHARED
GOAL OF EXPANDING CLIMATE
INVESTMENT INITIATIVES. AND I'M
ALSO HERE TODAY, NOT ONLY AS A
MEMBER OF CALPERS, WHO IS DEEPLY
CONCERNED ABOUT THE RISK THAT
CLIMATE CHANGE POSES. I'VE HAD
OVER A DECADE WITH THE CITY OF
LONG BEACH, OF COURSE, THAT RISK
POSES TO MY OWN RETIREMENT
FUTURE, BUT ALSO TO SHARE THE
VOICES OF THE THOUSANDS OF
HARDWORKING CALPERS AND STRS
MEMBERS WHO ARE ALSO CONCERNED
ABOUT THEIR PENSIONS NOT BEING
SAFE FROM THE TREMENDOUS RISKS
THAT CLIMATE CHANGE POSES. AND I
AM HEARTENED TO HEAR THAT THE
PENSION BOARDS ARE TAKING
CLIMATE RISK SERIOUSLY BY
FINALLY ADOPTING INITIATIVES
THAT EXPAND LOW CARBON
INVESTMENTS TO HELP ENSURE OUR
RETIREMENT FUNDS ARE NOT
IMPACTED BY STRANDED ASSETS OR
LONG UNDERPERFORM FORMING ENERGY
SECTORS. AND AS WE ALL SHOULD
KNOW, CLIMATE RISK IS FINANCIAL
RISK. AND SO I'M PLEASED AGAIN
TO SEE THE RECENT EFFORTS BY
CALSTRS TO MOVE 20% OF THEIR
PUBLIC EQUITY PORTFOLIO TO LOW
CARBON INDEXES, AND CALPERS
RECENT COMMITMENT TO MOVE $100
BILLION TOWARDS CLIMATE
SOLUTIONS BY 2030. AND I LOOK
FORWARD TO ONGOING DISCUSSIONS
UNDER. FORTUNATELY, WHERE WE
DEVIATE IN AGREEMENT ON THESE
INITIATIVES IS IN THE
OVERRELIANCE ON ENGAGEMENT
EFFORTS THAT'S BEEN SO TALKED
ABOUT AND IN MAINTAINING
INVESTMENTS IN THE HIGHEST
CARBON EMITTERS. EVERY
CALIFORNIA BENEFICIARY SHOULD BE
ASKING, WHY? WHY ARE OUR HARD
EARNED DOLLARS INVESTING IN THE
VERY DETRIMENT OF OUR SOCIETY?
WILL WE CONTINUE TO ASK OUR
FIREFIGHTERS, TEACHERS, AND HARD
WORKING CALIFORNIAN EMPLOYEES TO
KEEP CONTRIBUTING TO OUR
WILDFIRE RISK, FLOODING IN OUR
FARM COMMUNITIES AND EXTREME
HEAT AT OUR CHILDREN'S SCHOOLS?
THESE INITIATIVES SIMPLY DO NOT
GO FAR ENOUGH TO PROTECT PENSION
HOLDERS FROM THE RISKS OF
STRANDED ASSETS. AS SAID BEFORE,
RESULTING FROM THE GLOBAL
TRANSITION. AND AS OUR
FIREFIGHTERS ARE WORKING TO SAVE
COMMUNITIES FROM MEGA FIRES AND
CLASSIFIED EMPLOYEES AND
TEACHERS WORK IN SWELTERING HEAT
AND UNSAFE AIR QUALITY IN OUR
AGING SCHOOL INFRASTRUCTURE,
IT'S CLEAR THAT THE INACTION IS
PUTTING ALL OF US AT RISK
PERSONS, STAFF MEMBERS AND
RETIREES HAVE MADE IT VERY CLEAR
THAT THESE EFFORTS ARE NOT
AGGRESSIVE ENOUGH AND FAIL TO
ACKNOWLEDGE THE URGENCY NEEDED
TO SIMPLY PUT IT, ENGAGEMENT
WITH UNWILLING PARTICIPANTS HAS
NOT AND WILL NOT PRODUCE
IMMEDIATE AND WIDE RANGING
SOLUTIONS THAT ARE NEEDED TO
EFFECTIVELY CHANGE THE BEHAVIOR
OF THE WORST HIGH EMITTING
COMPANIES. JUST YESTERDAY,
EUROPE'S LARGEST PUBLIC PENSION
SYSTEM ANNOUNCED THAT THEY HAD
FULLY EXITED FROM $10.6 BILLION
IN FOSSIL FUEL HOLDINGS,
SPECIFICALLY BECAUSE THEIR
ENGAGEMENT POLICIES HAVE FAILED.
THEY'VE ACKNOWLEDGED THAT WITH
THE CATASTROPHIC IMPACTS OF
CLIMATE CHANGE ALREADY UPON US
AND THE LATEST SCIENCE CALLING
FOR IMMEDIATE EMISSIONS
REDUCTIONS OVER THE NEXT FIVE
YEARS, NOT EVEN TEN YEARS, FIVE
YEARS, IT IS EXTREMELY CLEAR
THAT ADVOCACY WITH HIGH EMITTING
COMPANIES FOR PIECEMEAL PROMISES
SIMPLY WILL NOT DELIVER THE
CHANGES NEEDED. MANY OF THESE
HIGH EMITTERS AT CLIMATE
ENGAGEMENT PLANS SEEK TO WORK
WITH HAVE ALREADY BEGUN TO
ACTUALLY REVERSE THEIR CLIMATE
PLEDGES. COMPANIES LIKE BP ARE
GOING BACK ON THEIR 23 2030
EMISSIONS COMMITMENTS. BLACKROCK
LEAVING AN ENGAGEMENT STRATEGY
THROUGH CLIMATE ACTION 100
LEAVING BEHIND EFFECTIVELY $6.6
TRILLION, OR TWO THIRDS OF THEIR
TOTAL ASSETS REPRESENTED BY THE
VERY CLIMATE ACTION 100 THAT HAS
BEEN, DISCUSSED TODAY. AND
EXXONMOBIL, A COMPANY WHOSE NET
ZERO BY 2050 COMMITMENT WAS
OFTEN LAUDED BY THE PENSION
FUNDS AS AN ENGAGEMENT VICTORY
ONLY INCLUDES IN ITS STRATEGY
SCOPE ONE AND TWO EMISSIONS IN
ITS PLEDGE, WHEN AN ESTIMATED
90% OF THEIR CARBON EMISSIONS,
OF COURSE, COME FROM SCOPE THREE
IN PRESS STATEMENTS. AFTER
HELPING TO ELECT TWO NEW
DIRECTORS TO EXXON'S BOARD,
CALSTRS CALLED IT A TURNING
POINT FOR THE COMPANY. BUT JUST
THREE YEARS LATER, THE SAME
COMPANY AND DIRECTORS ARE SUING,
SILENCING AND BULLYING THEIR OWN
SHAREHOLDERS. TOGETHER BP,
CHEVRON AND EXXON. AS SENATOR
SMALLWOOD CHÁVEZ HAS MENTIONED,
PER THE MORGAN STANLEY CLIMATE
INDEX, HAVE AN IMPLIED
TEMPERATURE RISE OF OVER THREE
DEGREES CELSIUS. THAT'S NEARLY
DOUBLE BY 2050. AND WHILE I
APPLAUD THE EFFORTS, AND I
REALLY DO APPLAUD THE EFFORTS
MAY NOT SEEM LIKE I DO, BUT I DO
APPLAUD THE EFFORTS FOR VOTING
AGAINST EXXONMOBIL CEO AND BOARD
OF DIRECTORS JUST THIS VERY
MORNING. THE FACT THAT THIS HAS
TO BE DONE SHOWS THE SHOWS THAT
MANY YEARS OF ENGAGEMENT WITH
BIG OIL HAS NOT CHANGED ANYTHING
OF MEANING. AND AS THESE
COMPANIES TO CONTINUE TO
GREENWASH THE PUBLIC WHILE KNOW
NOTHING OF SUBSTANCE CHANGES,
THEY REMAIN STATUS QUO. THEY
KEEP POLLUTING WITH OUR OUR
CALIFORNIA PENSIONS, OUR HARD
WORK DOLLARS. AND IN A LETTER I
AUTHORED IN APRIL OF THIS YEAR
TO THE HEADS OF THE PENSION
FUNDS, EXCUSE ME, THE HEADS OF
THE PENSION FUNDS, I ASKED FOR
INFORMATION ABOUT HOW THEY
MEASURE THE EFFECTIVENESS OF
THEIR ENGAGEMENT WITH OVER 100
FOSSIL FUEL COMPANIES, WHICH
THEY INVEST IN. WHILE CALSTRS
DID NOT SHARE ANSWERS IN WRITING
, CALPERS THANKFULLY SHARED THAT
THEIR PRIMARY ENGAGEMENT TOOLS
ARE PROXY VOTES AND SHARE OWNER
PROPOSALS, OF WHICH THERE ARE
ONLY A FEW DONE EACH YEAR OVER
THE LAST FIVE YEARS, MANY OF
WHICH FOCUSED ON LOBBYING
DISCLOSURES. I SHARE THIS NOT TO
SHAME THE FUNDS FOR THEIR HARD
AND DILIGENT WORK SO FAR, BUT TO
HIGHLIGHT THAT IN ALMOST A
DECADE OF ENGAGEMENT ADVOCACY
WITH A HANDFUL OF FOSSIL FUEL
COMPANIES, THERE HAS BEEN NO
IMPACTFUL CHANGE TO THE STATUS
QUO OF HOW COMPANIES OPERATE.
WHILE OUR GLOBAL TEMPERATURES
CONTINUE TO MARCH TO A POINT OF
NO RETURN, OUR OWN GOVERNOR AND
ATTORNEY GENERAL ARE CURRENTLY
SUING EXXONMOBIL, BP, SHELL,
CHEVRON, AND CONOCOPHILLIPS ON
BEHALF OF OUR STATE FOR
MISLEADING THE PUBLIC ABOUT
CLIMATE CHANGE FOR DECADES. YET
OUR PENSION SYSTEMS AGAIN
SIMULTANEOUSLY HOLD A COMBINED
INVESTMENT PORTFOLIO IN THESE
COMPANIES OF $6 BILLION. I WILL
END BY NOTING THAT ANY REAL
CLIMATE INITIATIVE THAT PROTECTS
WORKER PENSIONS MUST ALSO
CONTAIN AGGRESSIVE STRATEGY TO
EXIT THESE COMPANIES NOW, NOT
LATER. THOUSANDS OF TEACHERS AND
STATE WORKERS HAVE MADE THEIR
VOICES CLEAR AND HEARD ON THIS
ISSUE AND HAVE RESOUNDINGLY
SHARED THAT THEY DO NOT WANT
THEIR HARD EARNED RETIREMENT
FUNDS TO BE INVESTED IN THESE
PRIMARY DRIVERS OF CLIMATE
RELATED FINANCIAL RISK. I URGE
THE COMMITTEE TODAY AND IN THE
FUTURE, TO CONTINUE ITS RIGOROUS
OVERSIGHT OF THESE CLIMATE
EFFORTS, KEEP ASKING THE
QUESTIONS AND CONTINUE TO WORK
WITH THE PENSION BOARDS AND
THEIR LEADERSHIP TO ENSURE THAT
CALIFORNIA'S RETIREES ARE TRULY
SAFE FROM CLIMATE RISK. WITH
MILLIONS OF ACRES OF FOREST
FIRES EACH YEAR, DECADE LONG
DROUGHTS, CLASSROOMS FILLED WITH
SMOKE AND PLAYGROUNDS AND
WORKPLACES WITH TRIPLE DIGIT
TEMPERATURES, AT WHAT POINT WILL
WE RECOGNIZE THAT THERE IS A
PUBLIC INTEREST AND A FIDUCIARY
DUTY AND RESPONSIBILITY TO
ABANDON ENGAGEMENT AND PROTECT
OUR PENSION HOLDERS? I THANK YOU
AGAIN TO THE CHAIRS, MCKENNA AND
SMALLWOOD. CUEVAS OUR COMMITTEE
MEMBERS, AND, OF COURSE, THE
CONSULTANTS, PANELISTS,
COMMITTEE STAFF AND THE MEMBERS
OF THE PUBLIC THAT HAVE SO
ADAMANTLY SAID NO TO MORE
INVESTMENT AND TO CONTINUE TO
DIVEST OUR PENSIONS. THANK YOU
VERY MUCH. THANK YOU FOR YOUR
REMARKS. REMARKS, SENATOR
GONZALEZ, THANK YOU SO MUCH FOR
COMING OVER. THANK YOU, WE'LL
NOW TURN TO PUBLIC COMMENT. YOU
MAY LINE UP TO SPEAK INTO THE
MICROPHONE, BUT DO NOT TOUCH THE
MIC, YOU GUYS, AND WE'LL DO YOU
WANT TO TAKE THEM FIRST? YES. OH
I'M SO SORRY I HAD YOU LINE UP
AND WE'RE GOING TO TAKE. BUT
WE'RE GOING TO HEAR, SOME
COMMENTS FROM OUR CALIFORNIA
PROFESSIONAL FIREFIGHTERS. I
APOLOGIZE YOU GUYS DO HAVE A
SEAT. JUST FOR ONE MINUTE, WE'LL
NOW HEAR FROM OUR CALIFORNIA
PROFESSIONAL FIREFIGHTERS,
CALIFORNIA SCHOOL EMPLOYEES
ASSOCIATION AND BUILDING AND
CONSTRUCTION TRADES. YOU HAVE 5
TO 7 MINUTES TOTAL, NOT EACH
TOTAL. YES. THANK YOU. SORRY
ABOUT THAT. YOU GUYS. THANK YOU
SO MUCH, GOOD. MORNING, MADAM
CHAIRS. MY NAME IS CASSIE
MANCINI, AND I'M HERE ON BEHALF
OF THE CALIFORNIA SCHOOL
EMPLOYEES ASSOCIATION. CSTHE IS
THE LARGEST SINGLE STATE UNION
IN THE COUNTRY, REPRESENTING
MORE THAN 250,000 CLASSIFIED
SCHOOL EMPLOYEES AND RETIREES.
IS A BIT OF HISTORY. OUR UNION
WAS FOUNDED IN 1927 BY A GROUP
OF CUSTODIANS IN OAKLAND WHO
CAME TOGETHER IN ORDER TO SECURE
PENSION BENEFITS FOR SCHOOL
EMPLOYEES WHO COULDN'T AFFORD TO
RETIRE AND OUR UNIONS FOUGHT
TIRELESSLY AGAINST EFFORTS TO
UNDERMINE THE STABILITY AND
INDEPENDENCE OF OUR PENSION
SYSTEM. IT WAS A CSEA MEMBER,
PEGGY CLAYPOOL, WHO SUED
GOVERNOR PETE WILSON BACK IN
1992 AFTER HE STOLE $1.6 BILLION
FROM CALPERS TO SOLVE A STATE
BUDGET DEFICIT. THAT LAWSUIT WAS
UNSUCCESSFUL, BUT ULTIMATELY
SPURRED THE PASSAGE OF PROP 162
THAT ENSURED THE INDEPENDENCE OF
THE CALPERS BOARD AND GAVE
ULTIMATE AUTHORITY OVER
INVESTMENT DECISIONS TO THE
BOARD. IT'S THAT LONG HISTORY
THAT INFORMS CSA'S PERSPECTIVE
ON PENSION ISSUES AND OUR
ACTIVISM BEFORE THE BOARD. A
GROUP OF CSEA MEMBERS AND
RETIREES ATTEND CALPERS BOARD
MEETINGS EVERY MONTH TO MONITOR
BOARD ITEMS, PROVIDE INPUT
DURING PUBLIC COMMENT, AND
ENSURE THAT CALPERS IS ACTING IN
THE MEMBERS AND RETIREES BEST
INTERESTS. CALPERS MEMBERS ALSO
VOTE TO DEMOCRATICALLY ELECT
BOARD MEMBERS THAT REPRESENT
THEIR VALUES. AND AS WE'VE SEEN
TODAY, THOSE VALUES INCLUDE
ENVIRONMENTAL STEWARDSHIP. THE
CALPERS BOARD IS INVESTING 100
BILLION IN CLIMATE SOLUTIONS
OVER THE NEXT SIX YEARS, AND
SELLING INVESTMENTS THAT DON'T
HAVE A CREDIBLE EMISSIONS
REDUCTION PLAN. WE WERE ALSO
VERY GLAD TO SEE THE BOARD IN
NOVEMBER ADOPT A SET OF LABOR
PRINCIPLES ON ISSUES, INCLUDING
THE RIGHT TO COLLECTIVELY
BARGAIN FORCED LABOR, CHILD
LABOR AND DISCRIMINATION. CCPA
IS PROUDLY HOLDING CALPERS TO
ITS PLEDGES. WE RECENTLY JOINED
FOSSIL FREE CALIFORNIA, THE
CALIFORNIA ENVIRONMENTAL VOTERS
CLEAN WATER ACTIONS, SEIU
CALIFORNIA, AND MANY OTHER LABOR
UNIONS, AND A LETTER URGING
CALPERS TO VOTE AGAINST THE
EXXON BOARD OF DIRECTORS FOR
THEIR DANGEROUS LAWSUIT.
SHAREHOLDER ENGAGEMENT IS AN
IMPORTANT AND VIABLE,
ACCOUNTABLE. TOOL TO ACHIEVE
CHANGE, AND IT'S UP TO THE
CALPERS BOARD TO DETERMINE WHEN
SHAREHOLDER SHAREHOLDER ADVOCACY
IS NO LONGER FRUITFUL. I'LL END
WITH THIS CLASSIFIED EMPLOYEES
ARE SOME OF THE LOWEST PAID
MEMBERS OF OUR SCHOOL
COMMUNITIES. OVER HALF OF CSEA
MEMBERS MAKE LESS THAN $40,000 A
YEAR. MANY OF OUR MEMBERS COULD
MAKE MUCH MORE MONEY ELSEWHERE.
WORKING FOR A HIGHER WAGE. BUT
THEY STAY IN SCHOOLS NOT JUST
BECAUSE THEY'RE PASSIONATE ABOUT
PUBLIC EDUCATION, BUT BECAUSE OF
THEIR PROMISED PENSION AND THE
STABILITY THAT PENSION BRINGS IN
THEIR RETIREMENT. IT'S NO SECRET
THAT THE IMPACTS OF CLIMATE
CHANGE ARE DISPROPORTIONATELY
FELT BY LOW INCOME PEOPLE. BUT
NOW CALPERS IS THE CHALLENGE OF
ENSURING THAT AS OUR ECONOMY
TRANSITIONS AWAY FROM FOSSIL
FUELS, PUBLIC EMPLOYEES DON'T
ALSO SHOULDER THE BURDEN OF THAT
TRANSITION AT THE BARGAINING
TABLE, WHICH OFTEN HAPPENS WHEN
EMPLOYER CONTRIBUTION RATES
INCREASE YEAR AFTER YEAR DUE TO
UNFUNDED LIABILITIES. THE
STRATEGIC AND THOUGHTFUL
APPROACH TO ACHIEVING CARBON
NEUTRALITY THAT CALPERS IS
PRESENTED AS A GOOD ONE, AND
CSEA WILL CONTINUE TO HOLD
CALPERS AND CALPERS BOARD
MEMBERS TO THAT PLAN. THANK YOU.
THANK YOU, MADAM CHAIRS, DOUG
SUBERS, ON BEHALF OF THE
CALIFORNIA PROFESSIONAL
FIREFIGHTERS, CPF REPRESENTS
35,000 PROFESSIONAL FIREFIGHTERS
AND EMERGENCY MEDICAL SERVICES
PERSONNEL STATEWIDE AND A
MAJORITY OF OUR MEMBERS RELY ON
CALPERS FOR THEIR SECURE
RETIREMENT. SO MANY OF MY
COMMENTS TODAY WILL BE ABOUT
CALPERS. THEY LIKELY APPLY TO
CALSTRS AS WELL, THANK YOU FOR
HOSTING THIS IMPORTANT HEARING
TODAY AND BOTH OF YOUR COMMENTS.
AT THE OUTSET OF THIS HEARING,
WE DO APPRECIATE THE WORK THAT
CALPERS IS DOING TO ENSURE THE
RETIREMENT FUND IS HEALTHY AND
SUSTAINABLE. CALIFORNIA'S
FIREFIGHTERS WILL RELY ON AND
PAY FOR THE PROMISE OF A SECURE
RETIREMENT. OFTENTIMES, OUR
MEMBERS MAKE TOUGH DECISIONS AT
THE BARGAINING TABLE ABOUT THEIR
SALARIES AND OTHER BENEFITS TO
PROTECT THEIR RETIREMENT. IN
TURN, OUR MEMBERS TRUST OF
CALPERS IS ACTING AS A
FIDUCIARY, WITH CONTRIBUTIONS
PUT FORWARD BY OUR MEMBERS
DIRECTLY AND CONTRIBUTIONS MADE
ON BEHALF OF THE EMPLOYER. MANY
CALIFORNIA'S FIREFIGHTERS DO NOT
RECEIVE SOCIAL SECURITY, SO WHEN
THEY RETIRE, THEIR LONE,
RETIREMENT ALLOWANCE IS BASED
UPON THEIR RETIREMENT FROM
CALPERS OR A COUNTY RETIREMENT
SYSTEM OR A CHARTER SYSTEM. A
LITTLE EARLIER, DURING PANEL
ONE, THERE WAS A DISCUSSION
ABOUT PEPRA AND KIND OF THE
INTERACTIONS THAT EMPLOYEES AND
PEPPER HAS UNDER THE LAW FOR
FIREFIGHTERS OR OTHER PUBLIC
EMPLOYEES HIRED AFTER 2013.
THERE'S A STATUTORY REQUIREMENT
IN GOVERNMENT CODE SECTION 75
22.30 THAT REQUIRES THE
EMPLOYEES TO PAY 50% OF THE
NORMAL COST SHARE CONTRIBUTION
RATE, AND THAT EMPLOYERS CANNOT
SUBSIDIZE THAT. SO IN TURN,
WHEN, THE NORMAL COST RATE OR
CONTRIBUTION RATE GOES UP, FOR
EMPLOYEES TO PAY FOR THEIR
SECURE RETIREMENT, IT DIRECTLY
COMES HALF OF THAT DIRECTLY
COMES FROM THE EMPLOYEES. SO
ANYTHING THAT WOULD, ANY ACTIONS
THAT IMPACT OR DESTABILIZE OR
REDUCE RETURNS IS A DEEP CONCERN
TO CPF AND OUR MEMBERS,
ADDITIONALLY, A SECURE
RETIREMENT FOR OUR MEMBERS IS
CRITICAL AS FIREFIGHTERS FACE
SIGNIFICANTLY HIGHER INSTANCES
OF OCCUPATIONAL INJURY AND
ILLNESS. SO I KNOW THERE WAS A
LITTLE DISCUSSION EARLIER ABOUT,
SOME PARTS OF OUR SOCIETY LIVING
LONGER AND LONGER. WE HOPE THAT
TO BE THE CASE FOR FIREFIGHTERS.
BUT, OFTENTIMES THEY EXPERIENCE
INJURY AND ILLNESS THAT DOES
SHORTEN THEIR LIFESPAN, AS AN
EXAMPLE, THE INTERNATIONAL
AGENCY FOR RESEARCH ON CANCER
HAS CLASSIFIED FIREFIGHTING AS A
GROUP ONE CARCINOGEN, SO AS A
RESULT, IT'S IMPERATIVE FOR A
FIREFIGHTER AND THEIR FAMILY TO
HAVE A SECURE RETIREMENT, IN THE
UNFORTUNATE SCENARIO, WHERE THEY
ARE STRICKEN WITH OCCUPATIONAL
ILLNESS IN REGARD TO THE
DISCUSSION TODAY, CPF SUPPORTS
CALPERS EFFORTS TO MAXIMIZE
RETURNS IN A SUSTAINABLE AND
PRINCIPLED MANNER, INCLUDING
PORTFOLIO DIVERSIFICATION.
CALPERS HAS TAKEN STEPS TO ADOPT
SUSTAINABLE INVESTMENT
STRATEGIES, AS WE DISCUSSED
TODAY, THAT INCLUDE, THAT ALIGN
LONG TERM INVESTMENTS WITH
TECHNOLOGICAL INNOVATION
RESPONSE TO CLIMATE CHANGE, AND
OTHER IMPORTANT PRIORITIES LIKE
LABOR PRIORITIES MENTIONED BY
MISS MANCINI. MOREOVER, AS WE
HEARD TODAY, CALPERS HAS STEPPED
UP AND WILL HAVE THEIR VOICE
HEARD TO PROTECT SHAREHOLDER
RIGHTS. AND WE DO THINK THAT
ENGAGEMENT IS INCREDIBLY
IMPORTANT, NOT ONLY TO ENSURE
THAT COMPANIES ARE DOING THE
RIGHT THING, BUT ALSO TO PROTECT
THE INVESTMENTS MADE BY CALPERS
ON BEHALF OF OUR MEMBERS, CPS
SUPPORTS THE ACTION THAT CALPERS
TOOK TODAY AND WAS DISCUSSED BY
MISS FROST, AND THINKS THAT
CONTINUED ENGAGEMENT BY CALPERS
AND THE RETIREMENT SYSTEMS IS
REALLY IMPORTANT TO, NOT ONLY
ENSURE THE INVESTMENTS THEY MAKE
ARE SEEING SUCCESS, BUT ALSO
COMMITMENTS MADE BY COMPANIES
ARE BEING FOLLOWED THROUGH,
CALPERS HAS ALSO INCREASED
TRANSPARENCY AROUND INVESTMENTS
AND SUSTAINABILITY OF THE
INVESTMENT PORTFOLIO. AND I KNOW
THERE WERE SOME REPORTING, THAT
WAS DISCUSSED EARLIER. ALSO
REPORTING BY SB 964. LOOK
SPECIFICALLY AT CLIMATE RELATED
INVESTMENTS AND DISCLOSURES. AND
WE THINK THAT COULD BE AN
IMPORTANT TOOL FOR ALL
STAKEHOLDERS TO LOOK AT AND
UNDERSTAND, THE EVOLUTION OF
SUSTAINABILITY EFFORTS WITHIN
THE PORTFOLIO, IN CLOSING,
CALPERS HOLDS AND INVESTS OUR
MEMBERS, HARD EARNED DOLLARS,
AND WE SUPPORT THEM IN ACTING ON
THEIR FIDUCIARY DUTY TO SEEK
RETURNS THAT ARE STRONG AND
SUSTAINABLE. AND WE REALLY
APPRECIATE THE OPPORTUNITY TO
COME IN HERE TODAY. THANK YOU,
THANK YOU, THANK YOU SO MUCH.
NOW WE WILL MOVE TO PUBLIC
COMMENT. WE HAVE 20 MINUTES FOR
PUBLIC COMMENT. SO IF YOU IF
EVERYONE DOESN'T GET TO, YOU
KNOW, MAKE IT SHORT AND
MEANINGFUL SO THAT EVERYBODY
BEHIND YOU WILL HAVE AN
OPPORTUNITY TO SPEAK. ONCE THE
20 MINUTES IS OVER, IF YOU DON'T
GET TO SPEAK, YOU CAN SUBMIT
YOUR PUBLIC YOUR COMMENTS IN
WRITING, SO YOU MAY START. THANK
YOU. MY NAME IS JANE VOSBURGH. I
AM A CALSTRS BENEFICIARY AND
BOARD PRESIDENT OF FOSSIL FREE
CALIFORNIA FOR TEN YEARS.
CALSTRS HAS IGNORED THE PLEAS
FROM TEACHERS, PROFESSORS AND
THEIR STUDENTS TO STOP FUNDING
THE INDUSTRY THAT IS KNOWINGLY
CAUSED AND CONTINUES TO
PERPETUATE THE COSTLY
EXISTENTIAL CLIMATE CRISIS. AS
LONG TERM INVESTORS, IT IS
IRRESPONSIBLE TO CONTINUE
INVESTING IN AN INDUSTRY THAT IS
BEING REPLACED BY THE RAPID
GLOBAL TRANSITION TO CHEAPER
RENEWABLE ENERGY. MOUNTING
LAWSUITS FILED BY COMMUNITIES
INCLUDING THE STATE OF
CALIFORNIA, FOR DECEIVING THE
PUBLIC FOR DECADES AND COSTING
THE STATE BILLIONS, POSE ANOTHER
MAJOR THREAT EXCLUDING FOSSIL
FUELS WILL NOT HURT THE FUND.
ASSET MANAGERS WHO HAVE ALREADY
DONE SO HAVE EARNED EQUAL, IF
NOT BETTER, RETURNS. SHAREHOLDER
ENGAGEMENT WITH THE FOSSIL FUEL
INDUSTRY HAS FAILED MISERABLY.
THE INDUSTRY CONTINUES TO
EXPLORE AND DRILL NEW WELLS WITH
ABANDON, AND IT CONTINUES TO
DECEIVE ASSET MANAGERS INTO
BELIEVING THAT CARBON CAPTURE
AND STORAGE IS A VIABLE
SOLUTION. IT ISN'T. BEFORE THEY
BECOME STRANDED ASSETS,
LEGISLATORS NEED TO PROTECT OUR
PENSIONS BY MANDATING CALPERS
AND CALSTRS RID THEIR PORTFOLIOS
OF SUCH TOXIC INVESTMENTS. AND
THANK YOU. THANK YOU. HI, MY
NAME IS CYNTHIA KAUFMAN, AND I'M
A FACULTY MEMBER AT DE ANZA
COLLEGE AND ALSO A CALSTRS
BENEFICIARY. FUTURE I WANTED TO
ADDRESS MY COMMENTS TO THE STUDY
IN YOUR PACKET ENTITLED
DIVESTMENT AND ENGAGEMENT. THE
STUDY PURPORTS TO SHOW THAT
ENGAGEMENT IS BETTER THAN
DIVESTMENT FOR SHIFTING
COMPANIES GREENHOUSE GAS
EMISSIONS. BUT WHAT THE STUDY
DOESN'T DO AND WHAT IT MAKES,
WHAT MAKES THAT STUDY IRRELEVANT
TO ARGUMENTS AROUND DIVESTMENT
VERSUS ENGAGEMENT IS TO ACTUALLY
STUDY THE EFFECTS OF ENGAGEMENT
ON FOSSIL FUEL COMPANIES.
CALSTRS AND CALPERS HAVE DONE
REALLY IMPORTANT WORK ENGAGING
COMPANIES TO ACHIEVE DIVERSITY
GOALS AND SUSTAINABILITY GOALS.
AND THEY'RE DOING EXCELLENT WORK
IN SUSTAINABLE INVESTMENT
INVESTMENTS. BUT SHAREHOLDER
ENGAGEMENT HAS NEVER GOTTEN A
COMPANY TO CHANGE ITS BASIC
BUSINESS MODEL. FOSSIL FUEL
COMPANY ASSETS ARE BASED ON THE
EXTRACTION, REFINEMENT AND SALES
OF FOSSIL FUEL PRODUCTS. THOSE
COMPANIES ARE NOT DIVERSIFYING
AND THEY CONTINUE TO PUT OUT
MISINFORMATION AND TO ENGAGE IN
OBSTRUCTIONIST POLITICS. AND
THAT'S WHY THE GOVERNOR AND THE
ATTORNEY GENERAL ARE SUING THE
FOSSIL FUEL COMPANIES THAT
CALSTRS AND CALPERS ARE INVESTED
IN. SO IF YOU REALLY LOOK AT THE
IMPACT DIVESTMENT WILL HAVE A
TREMENDOUS POLITICAL IMPACT. AND
THAT'S WHAT WE'RE LOOKING FOR.
THANK YOU. GOOD MORNING. ALMOST
GOOD AFTERNOON. I'M BILL
VOSBURGH AND I'M A RETIRED
TEACHER AND A CALSTRS PENSIONER.
IN 2017, MY WIFE AND MY FAMILY
AND I LOST OUR HOME AND
EVERYTHING WE OWNED TO ONE OF
THE CALIFORNIA WILDFIRES. WE'RE
NOT ALONE. IN SONOMA COUNTY THAT
WEEK, OVER 8300 OTHER RESIDENTS
LOST THEIR HOMES AND ALL THEIR
POSSESSIONS. AND SINCE 2017,
TÍNH THROUGHOUT THE STATE.
SORRY. HERE. TECHNICAL
DIFFICULTY HERE, WILDFIRES HAVE
CAUSED HAVE COST HUNDREDS OF
LIVES DESTROYED THOUSANDS OF
HOMES, BURNED, MILLIONS OF ACRES
AND COST HUNDREDS OF BILLIONS OF
DOLLARS IN PROPERTY DAMAGE. AND
THEY'RE GOING TO GET WORSE THIS
YEAR. STATE FARM JUST DROPPED MY
HOMEOWNER'S INSURANCE, AND ALONG
WITH OVER 100,000 OTHER PEOPLE,
NOW, I MAY HAVE TO GO TO THE
CALIFORNIA FAIR PLAN. MY RECENT
QUOTE FOR THAT WAS $5,600 PER
YEAR. I WAS PAYING $1,000 PER
YEAR. SO THESE INCREASED FIRES
ARE A DIRECT RESULT OF GLOBAL
WARMING CAUSED BY BURNING FOSSIL
FUELS. AND THOSE COMPANIES HAVE
KNOWN AND LIED TO US ABOUT THE
EFFECTS OF THEIR PRODUCTS SINCE
THE 70S AND SINCE FOSSIL FUEL
COMPANIES ARE THE DIRECT CAUSE
OF SO MUCH HARM TO CALIFORNIA
CITIZENS, IT'S HARD TO
COMPREHEND WHY CALPERS AND
CALSTRS WOULD CONTINUE TO INVEST
IN THOSE COMPANIES WHICH CAUSED
SO MUCH DEATH, DESTRUCTION, AND
HARM. THANK YOU VERY MUCH. WE'RE
AT ABOUT 16 MINUTES. YEAH, MADAM
CHAIRS, AND MEMBERS, I WANT TO
THANK YOU FOR HAVING THIS
HEARING. MY NAME IS PAUL DIEGO.
ON BEHALF OF THE WESTERN STATES
PETROLEUM ASSOCIATION, I'M NOT
GOING TO TALK ABOUT THE BILL, A
FEW PEOPLE THAT TESTIFIED BEFORE
ME SAID THESE ARE HIGH RISK
INVESTMENTS. I CAN TELL YOU THAT
WE HAD AN ECONOMIST DO AN
ANALYSIS IF DIVESTMENT OCCURRED
IN 2021 AND 2122, AND THE
FINDINGS OF THAT ANALYSIS WAS
THAT THE EARNINGS CALPERS
EARNINGS FROM OIL AND GAS
INVESTMENTS AFFECTED ABOUT $1
BILLION IN 2122, A RETURN OF
18.7. THE REST OF THE CALPERS
STOCK PORTFOLIO FELL BY 13.4.
LAGGING OIL AND GAS RETURNS BY
32% DURING THAT YEAR. CALSTRS
THE TOTAL EARNINGS IN OIL AND
GAS INVESTMENT AFFECT BY
DIVESTMENT WAS ABOUT 750
MILLION, A RETURN OF ABOUT 18.7.
THE THIS COMPARES TO 16.9% LOSS
FOR THE REST OF THE CALPERS
PORTFOLIO. SO THESE ARE REAL
INVESTMENTS. THEY ARE NOT RISKY,
I, I APPLAUD THE HARD WORK
CALSTRS AND CALPERS ARE DOING
WITH ENGAGEMENT. BUT, WITH THAT,
I THANK YOU VERY MUCH FOR HAVING
THE HEARING. MY NAME IS SHEILA
THORNE. I'M A CALPERS
BENEFICIARY. A JOINT REPORT OF
THE SENATE COMMITTEE ON THE
BUDGET AND THE HOUSE OVERSIGHT
COMMITTEE RELEASED JUST LAST
APRIL. THIS APRIL OF 19, 2024,
SAYS, QUOTE, DESPITE FOSSIL FUEL
COMPANIES PLEDGING TO MEET
VARIOUS EMISSIONS REDUCTION
TARGETS, INTERNAL COMMUNICATION
LINES SHOW THAT THEY CONTINUE TO
PROMOTE A FUTURE DOMINATED BY
OIL AND GAS AND ROUTINELY TAKE
ACTIONS THAT ARE DIRECTLY AT
ODDS WITH THEIR PLEDGES. FOR
EXAMPLE, A 2020 CALPERS
ADDRESSING CLIMATE CHANGE REPORT
LAUDED CHEVRON'S ANNOUNCED
REDUCTION GOALS FOR GREENHOUSE
GAS INTENSITY AND PRODUCTION.
NEVERTHELESS, CHEVRON'S OIL AND
GAS ACTIVITIES HAVE INCREASED,
PRODUCING A RECORD 3.1 MILLION
OIL EQUIVALENT BARRELS A DAY.
THUS INCREASING OVERALL
EMISSIONS IN THE SAME DOUBLE
SPEAK, EXXON PROMISED REDUCTIONS
IN FLARING AND METHANE
EMISSIONS, AND THEN CONFIRMED
THIS YEAR THAT IT WOULD CONTINUE
TO INCREASE OIL AND GAS
PRODUCTION BY ABOUT 10% OVER THE
NEXT FOUR YEARS, AND DOUBLE
PRODUCTION IN THE PERMIAN BASIN.
SHELL PROMISED QUOTE NET ZERO
CARBON EMISSIONS BY 2050 AND NET
ZERO CARBON EMISSIONS FROM THE
ENERGY PRODUCTS WE SELL.
HOWEVER, A FINANCIAL TIMES
ARTICLE REVEALED A DISCLAIMER
THAT SHELL WILL NOT CHANGE ITS
CAPITAL DEPLOYMENT PLANS UNTIL
SOCIETY ACTS. IT IS GOING AHEAD
WITH NEW PROJECTS IN NIGERIA TO
PRODUCE 20 MILLION TONS OF
LIQUEFIED NATURAL GAS A YEAR AND
NOW CONCEDES THAT, QUOTE, THE
2050 TARGET IS CURRENTLY OUTSIDE
OUR PLANNING PERIOD. END QUOTE.
UNFORTUNATELY, CALPERS VOICE HAS
NOT BEEN HEARD, WHEREAS
DIVESTMENT IS A POLITICAL
PRESSURE, THE ONLY KIND OF
PRESSURE TO MAKE BIG OIL CHANGE.
THANK YOU. THANK WELL GOOD
MORNING. MY NAME IS MARTHA PENRY
AND I AM THE CHAIR OF THE
CALIFORNIA SCHOOL EMPLOYEES
ASSOCIATION. THÀNH RETIREE UNIT,
EXECUTIVE BOARD, CAC RETIREES
RELY ON OUR CALPERS PENSION TO
GET BY. MANY RETIREES CHOSE TO
WORK IN OUR PUBLIC SCHOOLS FOR
THAT PROMISE OF STABILITY IN
RETIREMENT, GUARANTEED BY A
PUBLIC PENSION. OUR PENSIONS ARE
OUR DEFERRED COMPENSATION. WE'VE
CONTRIBUTED TENS OF THOUSANDS OF
DOLLARS FROM OUR HARD EARNED
PAYCHECKS IN ORDER TO VEST. AND
JUST LIKE ANY OTHER PENSION,
SAVING FOR RETIREMENT THROUGH A
401 K OR AN IRA, WE DESERVE TO
HAVE THE ULTIMATE SAY IN HOW OUR
MONEY IS INVESTED TO GUARANTEE
GOOD RETURNS. CALPERS BOARD
MEMBERS ARE ACCOUNTABLE TO US,
THE PEOPLE WHO'VE PUT OUR MONEY
INTO THE SYSTEM. WE ELECT THE
BOARD WITH THE DIRECTIVE AND
ASSURE THAT NOTHING WILL
THREATEN THE PENSION. I'VE BEEN
PROMISED FOR MY SERVICE OR THE
VIABILITY OF THAT PENSION FOR
FUTURE GENERATIONS OF PUBLIC
SERVANTS. I'M GLAD WE'RE HAVING
THIS DISCUSSION ON CALPERS
EMERGING CLIMATE INITIATIVES AND
THE GOOD OUR INVESTMENTS CAN DO,
BUT I HOPE WE DON'T LOSE SIGHT
OF THE GRAVE CONSEQUENCES FOR
RETIREES AND ACTIVE MEMBERS OF
THIS. IF THE STABILITY OF OUR
PENSION SYSTEM IS THREATENED BY
FUTURE DIPS IN THE PENSION
FUNDED STATUS. THANK YOU, THANK
YOU. WE HAVE TEN MINUTES. THANK
YOU. I'M SANDY EMERSON FROM
FOSSIL FREE CALIFORNIA, A
LONGTIME RESEARCH VOLUNTEER.
WHEN I FIRST BECAME A CLIMATE
ACTIVIST IN 2014, I WAS
GALVANIZED BY THE FACT THAT THE
ROCKEFELLER BROTHERS FUND
DIVESTED FROM FOSSIL FUELS. THE
ROCKEFELLER BROTHERS FUND IS
STILL THRIVING, AND GLOBAL
DIVESTMENT PLEDGES NOW REPRESENT
MORE THAN $46 TRILLION. OUR
PENSION FUNDS HAVE THE TOOLS AND
THE POWER ON THEIR OWN TO
EXCLUDE FOSSIL FUEL COMPANIES
FROM THEIR PORTFOLIOS. FOR
EXAMPLE, IN 2018, CALSTRS
DECIDED NOT TO INCLUDE SAUDI
ARAMCO IN ITS CUSTOM BENCHMARK,
AND IT IMMEDIATELY ADDED THAT TO
THE DIVESTMENT IMPACT CALCULATOR
THAT BOTH FUNDS MAINTAIN. YOU
MIGHT BE INTERESTED TO KNOW THAT
WITH THE EXCEPTION OF TOBACCO,
ALL DIVESTMENTS TO DATE ARE NOW
PRODUCING NET POSITIVE RETURNS
WITH SHAREHOLDER ENGAGEMENT, THE
POWER RESTS WITH THE CORPORATION
AND SHAREHOLDERS ARE
PETITIONERS. EXXON IS NOW SUING
SHAREHOLDER ACTIVISTS TO DENY
THEM EVEN THE RIGHT TO PETITION.
AS YOU KNOW, CALIFORNIA IS SUING
FIVE OIL MAJORS FOR CLIMATE
DAMAGES AND DECEPTION EXXON,
CHEVRON, SHELL, BP AND
CONOCOPHILLIPS REPRESENT 40% OF
THE MARKET VALUES OF OUR PENSION
FUNDS. LARGEST FOSSIL FUEL
INVESTMENTS JUST THOSE FIVE
STAYING INVESTED AND HOPING THAT
ENGAGEMENT AND GREEN VALUES WILL
CHANGE THE BEHAVIOR OF FOSSIL
FUEL COMPANIES KEEPS THE POWER
IN THE HANDS OF COMPANIES THAT
ARE THREATENING ALL OF OUR
FUTURES. THANK YOU. THANK YOU.
HELLO, MY NAME IS MIRIAM EID.
I'M THE EXECUTIVE DIRECTOR AT
FOSSIL FREE CALIFORNIA AND I
WANTED TO SHARE ONE, HIGHLIGHT
ON ENGAGEMENT AND THEN ALSO
SHARE A RESPONSE TO THE STUDY.
SO REGARDING ENGAGEMENT POINT,
THERE WAS A LOT OF DISCUSSION
ABOUT ENGAGEMENT WITH COMPANIES
SUCH AS TOYOTA AND THE 30%
REDUCTION IN THE CARS EMISSIONS
OVER ITS LIFETIME. THAT'S
EXCELLENT. THAT'S A PERFECT
EXAMPLE OF ENGAGEMENT. WHAT
ISN'T A PERFECT EXAMPLE OF
ENGAGEMENT IS ENGAGING WITH A
COMPANIES WHO WHOSE MISSION IS
INVESTING IN CLIMATE CRISIS.
FOSSIL FUEL COMPANIES CANNOT
BECOME SOMETHING OTHER THAN
FOSSIL FUEL COMPANIES. THAT'S
WHERE ENGAGEMENT FAILS US. AS
FOR THE STUDY THAT YOU ALL
RECEIVED, I SHARED IT WITH TOM
SANZILLO, WHO IS THE FORMER
DEPUTY COMPTROLLER IN NEW YORK
AND NOW WORKS FOR THE IEEFA
INSTITUTE FOR ENERGY ECONOMICS
AND FINANCIAL ANALYSIS, WHICH
PUTS OUT A LOT OF REPORTS ON
FINANCIAL ANALYSIS IN THE
CLIMATE CRISIS. HIS RESPONSE TO
THE REPORT WAS THIS THE PROOF IN
THE REPORT IS ELUSIVE, HE SAID,
IN FACT, THAT THE, SORRY, THE
NEXT ARGUMENT IS, IT SEEMS TO
SAY, THAT ANY FORM OF INVESTMENT
ACTION THAT RESULTS IN LOWER
ALLOCATIONS OF FOSSIL FUEL
HOLDINGS CANNOT POSSIBLY REDUCE
EMISSIONS, AND THAT IS ERRONEOUS
. CALSTRS IS ITSELF REDUCING
THEIR EMISSIONS BY LOWERING
THEIR CARBON INDEXES. AND SO OUR
OWN PENSIONS ARE WORKING AGAINST
THE ARGUMENTS OF THIS STUDY. I
WOULD SUGGEST THAT YOU REALLY
DIG INTO IT A LITTLE BIT MORE,
THE OTHER PIECE THAT I WOULD
LOOK AT IS HOW THEY'RE MEASURING
THE SCOPES AND WHAT, WHICH
COMPANIES THEY'RE INVESTING IN.
ONE OF THOMPSON'S CLOSE
COLLEAGUES IDENTIFIED THAT SHELL
REPORTED SCOPE ONE FOOTPRINTS OF
82 MILLION METRIC TONS OF CO2,
WHEREAS IF YOU LOOKED AT THEIR
SCOPE THREE EMISSIONS, THAT WAS
910 MILLION METRIC TONS. SO THE
VAST MAJORITY OF THEIR CARBON
FOOTPRINT WAS NOT STUDIED IN
THIS STUDY. THEY WERE ONLY
LOOKING AT SCOPE ONE. SO JUST
WANTED TO HIGHLIGHT A FEW THINGS
FOR YOU. THANK YOU SO MUCH.
THANK OKAY. WE HAVE ABOUT SIX
MINUTES REMAINING. SO WE WANT TO
TRY TO GET HERE A LITTLE BIT
FROM EVERYONE PLEASE. THANK YOU.
THANK YOU. GOOD MORNING RUTH
HOLTON HUDSON CALPERS
BENEFICIARY AND REPRESENTATIVE
OF THIRD ACT. WE CERTAINLY
APPRECIATE WHAT THE PENSION
FUNDS ARE DOING, BUT FRANKLY,
FEAR THAT THEY'RE JUST NOT
MOVING FAST ENOUGH, SCIENCE
TELLS US THERE IS NO TIME TO
WASTE TRANSITIONING INTO THE
GREEN ENERGY ECONOMY. ACCORDING
TO UCLA'S HEAT INDEX, FOR
EXAMPLE, IN TEN YEARS, KERN
COUNTY WILL EXPERIENCE TWO
MONTHS OF OVER 100 DEGREES.
THAT'S A MONTH MORE THAN THEY DO
TODAY. AND IN NEARLY FIVE MONTHS
OF OVER 90 DEGREES,
SIGNIFICANTLY AFFECTING
RESIDENTS, PARTICULARLY THOSE IN
LOW AND LOW INCOME COMMUNITIES
AND MARGINALIZED COMMUNITIES AND
THE ECONOMY. THE WORSENING
EFFECTS OF CLIMATE CHANGE WILL,
I HOPE, SPUR FASTER MOVEMENT
AWAY FROM FOSSIL FUELS, WHICH
WILL SIGNIFICANTLY REDUCE
RETURNS FROM FOSSIL FUEL
INVESTMENTS. THE QUESTION IS,
WILL THE PENSION FUNDS MOVE OUT
OF THEIR INVESTMENT S IN TIME
BEFORE INCURRING SIGNIFICANT
LOSSES? ALREADY, WITH THE
EXCEPTION OF THE LAST THREE
YEARS BECAUSE OF THE WAR IN
UKRAINE, STUDIES HAVE SHOWN THAT
FOSSIL FUEL RETURNS IN THE LAST
TEN YEARS ARE FAR BELOW THE
RETURN OF THE S&P 500. THE
FUND'S FIDUCIARY RESPONSIBILITY
IS TO MAXIMIZE RETURNS STAYING
IN FOSSIL FUELS IS BAD FOR THE
FUNDS AND THE BENEFICIARIES.
THANK YOU. MADAM CHAIR,
COMMITTEE MEMBERS, MY NAME IS
PATRICIA PAVONI. I'M A RETIRED
STATE EMPLOYEE AND A MEMBER OF
PERS. I BELIEVE IT'S IMPERATIVE
THAT PURRS AND STIRS DEVELOP AN
EVOLVING, EFFECTIVE AND
SUSTAINABLE STRATEGY TO DIVEST
FROM THE FOSSIL FUEL INDUSTRY
AND REDIRECT FUNDS TO GREEN
ENERGY AND OTHER INVESTMENTS
THAT ARE GOOD FOR THE
ENVIRONMENT. OUR PUBLIC PENSION
BOARDS HAVE A DUTY TO TAKE
SIGNIFICANT ACTION TO REDUCE THE
CLIMATE RISKS, AND WHETHER
CATASTROPHES THAT MAY ROB OUR
YOUNGEST CALIFORNIANS OF A GOOD
OF GOOD HEALTH AND PROSPERITY IN
THE YEARS TO COME. THANK YOU.
THANK YOU. GOOD MORNING. MY NAME
IS DIANA CURIEL, AND I'M A
CALSTRS BENEFICIARY. IN THE LAST
SEVERAL YEARS, CALSTRS HAS BEEN
MAKING PROGRESS MANAGING CLIMATE
RISK IN ITS INVESTMENT
PORTFOLIO. HOWEVER THERE IS
STILL MUCH WORK TO BE DONE. AS
AN EXAMPLE, 51.6% OF ITS PUBLIC
EQUITY PORTFOLIO IS NOT ALIGNED
WITH THE PARIS CLIMATE
AGREEMENT, AND 15.2% OF THE
PORTFOLIO IS ALIGNED WITH A
TEMPERATURE RISE BETWEEN 3.2 AND
TEN DEGREES CELSIUS. THIS IS AN
ALARMING RED FLAG. CALSTRS HAS A
LONG HELD BELIEF THAT ENGAGEMENT
WITH THE FOSSIL FUEL INDUSTRY IS
PREFERABLE TO DIVESTMENT.
HOWEVER OUR ATTEMPTS AT
ENGAGEMENT HAVE BEEN WORSE THAN
INEFFECTIVE NET ZERO BY 2050.
PLEDGES ARE NOT ONLY TOO LATE,
THEY RELY ON UNPROVEN, EXPENSIVE
AND POTENTIALLY HAZARDOUS CARBON
CAPTURE TECHNOLOGY TO ACHIEVE
EMISSIONS REDUCTIONS. CONTINUED
INVESTMENTS IN THE FOSSIL FUEL
INDUSTRY HAVE ENABLED COMPANIES
SUCH AS EXXONMOBIL AND CHEVRON
TO PLAN FOR EXPANDING
PRODUCTION. RYSTAD ENERGY HAS
ESTIMATED THAT THE TOTAL, WHICH
THE TOP TEN COMPANIES PLAN TO
USE FOR THIS EXPANSION BY 2030,
WILL BE OVER 600 BILLION. WE
CAN'T ENABLE THE UNSCRUPULOUS
FOSSIL FUEL INDUSTRY TO DELAY
THE ENERGY TRANSITION. THANK
YOU. HI THERE, TRINA LEE CALSTRS
AND GRATEFUL CALSTRS MEMBER.
FOSSIL FUEL COMPANIES PRODUCE A
DANGEROUS, UNSUSTAINABLE PROJECT
PRODUCT. IT DOESN'T MATTER HOW
MUCH WE ENGAGE OR ENCOURAGE
THAT. THAT'S WHAT THEY MAKE.
FOSSIL FUEL COMPANIES CREATE
MORE HARM IN THE WORLD THAN GOOD
IN OUR PORTFOLIOS. AND THAT'S
WHY I HOPE THAT MY RETIREMENT
FUND WILL REMOVE ITSELF FROM
FOSSIL FUEL INVESTMENT. THANK
YOU. THANK JUDITH SMALL I'M A
CALSTRS BENEFICIARY AND A FORMER
HIGH SCHOOL TEACHER. I'M ALSO
THE GRANDMOTHER OF FOUR LITTLE
GIRLS, THE OLDEST TURNED SEVEN
JUST LAST WEEK. THEY ARE ONE OF
THE REASONS I'M HERE. THESE FOUR
LITTLE GIRLS, ALONG WITH ALL MY
FORMER STUDENTS WHOM I'VE SEEN,
MOVE AND GROW OUT INTO THE WORLD
AS AN EDUCATOR, A PARENT, A
GRANDPARENT. I WANT TO SEE THEM
GROW INTO A WORLD THAT'S STILL
LIVABLE, A WORLD THAT BEARS SOME
RESEMBLANCE TO THE WORLD THAT I
GREW UP IN, AND THAT I CAME TO
LOVE SO FIERCELY BECAUSE YOUNG
PEOPLE CHANGE SO FAST. THEY GROW
UP SO FAST. LAILA MY
GRANDDAUGHTER WHO TURNED SEVEN,
WILL BE 17 IN JUST TEN YEARS AND
WILDFIRES, HURRICANES, FLOODS
THESE ALSO MEAN MOVE FAST. WE
NEED TO MOVE FAST AS WELL. I
APPLAUD WHAT'S ALREADY BEEN
DONE, BUT I URGE THAT WITHIN THE
PARAMETERS OF FIDUCIARY
RESPONSIBILITY, THE COMPLETE
DECARBONIZATION PORTFOLIO OCCUR
WITH ALL POSSIBLE SPEED. THANK
YOU. THANK YOU. WE HAVE ABOUT A
MINUTE, BUT I'M GOING TO TAKE A
POINT OF PRIVILEGE AND GIVE THE
LAST TWO PEOPLE A CHANCE TO
SPEAK. THANK YOU AND GOOD
AFTERNOON, MADAM CHAIR.
COMMITTEE MEMBERS AND COMMITTEE
STAFF LISTENING IN TO THE
HEARING THIS AFTERNOON. MY NAME
IS DOCTOR PIERRE RIVERA. I'M A
CALPERS RETIREE MEMBER. I
STARTED MY STATE CAREER AFTER MY
PHD AT UC DAVIS IN ENVIRONMENTAL
POLICY AND ECONOMICS, MY CAREER
STARTED AT FISH AND GAME, DOING
ENVIRONMENTAL POLLUTION DAMAGES,
OIL SPILL CASES, I WORKED FOR
DEPARTMENT OF FINANCE UNDER
MICHAEL COHEN FOR A FEW YEARS ON
THE ECONOMIC IMPACTS OF MAJOR
REGULATIONS, BUT THE BULK OF MY
CAREER WAS AT THE CALIFORNIA
ENERGY COMMISSION AS A CLIMATE
CHANGE PROGRAM MANAGER FOR TWO
DECADES, I BELIEVE I WAS THE
FIRST FULL TIME CLIMATE POLICY
POSITION IN STATE GOVERNMENT. IN
2001, I PARTICIPATED IN A LOT OF
BOLD LEGISLATION THAT CAME OUT
OF THIS BUILDING FROM FRAN
PAVLEY'S AB 1493, THE AUTOMOBILE
GENE, GREENHOUSE GAS RULE AB 32
THAT GOVERNOR SCHWARZENEGGER
SIGNED. THESE WERE BOLD
LEGISLATION THAT CAME OUT OF THE
LEGISLATURE. AND I THINK WE NEED
TO HAVE EVEN BOLDER ACTIONS NOW
ON CLIMATE CHANGE. THE PACE OF
OUR SOLUTIONS IS NOT KEEPING UP
WITH WHAT SCIENTISTS DEMAND, A
NET ZERO BY 2050 JUST IS NOT
GOING TO WORK. I WOULD
ENCOURAGE. THANK YOU. OKAY. YOUR
TIME IS UP. ALL RIGHT. THANK YOU
SO MUCH. I'LL BE I'LL BE REALLY
QUICK. THANK YOU, JUST WANTED TO
MAKE THE POINT AND REITERATE
THAT, YOU KNOW, IN THE CALSTRS
REPORT, IT HAS 2050 AS THE DATE
FOR NET ZERO EMISSIONS. I JUST
WANT TO REITERATE THAT THAT'S
NOT SOON ENOUGH FOR THE IMPACTS
WE'RE HAVING. IN FACT, WE HAVE
GOALS WE HAVE TO REACH IN FIVE
YEARS. LIKE SENATOR GONZALEZ
SAID. THE SECOND POINT IS THAT,
CALPERS OAN OWN REPORT ADMITS
THAT COMPANIES IN THE CLIMATE
ACTION 100 PLUS GROUP THAT THEY
ENGAGE WITH, ONLY 9, HAVE
TARGETS IN LINE WITH THE PARIS
AGREEMENT GOALS, AND ONLY 8% HAD
LOBBYING EFFORTS ALIGNED WITH
NECESSARY CLIMATE ACTION, THE
NEXT POINT I WANT TO MAKE IS
THAT, STUDIES HAVE ACTUALLY
SHOWN THAT WHEN THERE WAS NO
INVESTMENT IN FOSSIL FUELS, THE
PENSIONS WOULD HAVE ACTUALLY
GAINED. THERE WAS A STUDY DONE
FROM 2009 TO 2019 IF DIVESTMENT
FROM FOSSIL FUELS HAD OCCURRED,
BECAUSE IT'S A RISKY INVESTMENT,
THE PENSION FUNDS WOULD ACTUALLY
HAVE BEEN 11.9 BILLION RICHER,
FOR CALSTRS AND 5.5 BILLION
RICHER FOR CALPERS. AND I JUST
WANT TO ALSO REITERATE THAT THE
POLICY OF ENGAGEMENT IS GREAT.
AND I APPLAUD THOSE EFFORTS,
FROM THE CALPERS AND CALSTRS
BOARDS. BUT AS MIRIAM MENTIONED,
IT'S INEFFECTIVE FOR FOSSIL FUEL
COMPANIES WHEN THEY'VE LIED TO
US FOR DECADES AND DECADES AND
HAVE SHOWN FAILURE. WE SHOULDN'T
BE DOING THE SAME THING OVER AND
OVER AGAIN AND TRUSTING THEM TO
BECOME TRULY GREENER, OKAY, I'LL
END WITH THAT. OH, AND THE LAST
THING I'LL JUST SAY IS THAT I'M
HAPPY ABOUT THE, YOU KNOW, VOTE
AGAINST THE BOARD OF DIRECTORS.
BUT THE TRUTH IS, THOSE PENSION
FUNDS ARE STILL INVESTING IN
EXXON, AND THERE'S NO REAL
CONSEQUENCE, WHICH IS WHY WE
SOMETIMES NEED THE LEGISLATURE
TO STEP IN AND, YOU KNOW, GIVE
THEIR INPUT AS WELL, BECAUSE
THERE'S NO CONSEQUENCE TO EXXON.
TRUE CONSEQUENCE RIGHT NOW,
OKAY. I'LL END WITH THAT. THANK
YOU. THANK YOU, THANK YOU, MADAM
CHAIR AND STAFF, MITCH STEIGER
WITH CFT, A UNION OF ABOUT
120,000 EDUCATORS AND CLASSIFIED
PROFESSIONALS ACROSS CALIFORNIA.
WE'D LIKE TO JUST SPEAK BROADLY
IN SUPPORT OF ALL THE CLIMATE
MEASURES MENTIONED EARLIER. WE
DEFINITELY ENDORSE THOSE. AND
ENCOURAGE MORE OF THAT
DEFINITELY MOVES US IN THE RIGHT
DIRECTION. WE WOULD ALSO VERY
MUCH ALIGN OURSELVES WITH THE
COMMENTS OF SENATOR GONZALEZ AND
PREVIOUS SPEAKERS IN FAVOR OF A
MORE AGGRESSIVE STRATEGY AND
MOVING AWAY FROM FOSSIL FUEL
INVESTMENTS. WE THINK THAT THE
EVIDENCE IS PRETTY CLEAR THAT
NOT ONLY WOULD THE FUND BE
BETTER OFF HAD WE DIVESTED
EARLIER, BUT THAT THESE
COMPANIES SEE THE WORLD PRETTY
FUNDAMENTALLY DIFFERENTLY THAN
OUR PENSION FUNDS. SHOULD WE
HAVE MEMBERS RIGHT NOW WHO ARE
PAYING INTO THESE FUNDS? WHO
WILL NEED THOSE BENEFITS TO BE
THERE 70, 75 YEARS FROM NOW? AND
AT EVERY TURN? WE THINK THESE
COMPANIES HAVE MADE PRETTY CLEAR
CHOICES THAT THEY'RE NOT
THINKING ABOUT 75 YEARS IN THE
FUTURE. THEY'RE THINKING MORE
ABOUT THE NEXT QUARTER AND THE
QUARTER AFTER THAT, AND
MAXIMIZING RETURNS IN A PRETTY
SHORTSIGHTED WAY. AND THAT ON
TOP OF THE FACT THAT THIS IS
REALLY WORKERS MONEY, IT'S BEEN
MENTIONED BY A FEW SPEAKERS.
THIS IS MONEY THAT WOULD BE IN
OUR POCKETS RIGHT NOW HAD WE NOT
SET IT ASIDE FOR OUR OWN
FUTURES. AND IN THAT RESPECT, IT
SHOULD REALLY REFLECT THE VALUES
THAT WE HOLD. AND THESE
COMPANIES HAVE SHOWN THAT THEY
DON'T SHARE OUR VALUES, THAT
THEY ARE ABOUT SOMETHING VERY
DIFFERENT THAN WHAT OUR PENSION
FUNDS SHOULD BE ABOUT, AND THAT
IN THE INTEREST OF MAKING SURE
THAT OUR FUNDS NOT ONLY ARE
THERE AND HEALTHY 75 YEARS IN
THE FUTURE, BUT THAT WE HAVE A
PLANET WORTH LIVING ON 75 YEARS
IN THE FUTURE, WE WOULD
ENCOURAGE MOVING IN THAT
DIRECTION AND MOVING AWAY FROM
FOSSIL FUEL INVESTMENTS. THANK
YOU. THANK YOU. WELL, I WANT TO
THANK ALL OF THE STAKEHOLDERS
AND PRESENTERS TODAY FOR YOUR
COMMENTS, YOUR INFORMATION, YOUR
STRATEGIES, BUT MOST OF ALL, THE
SENSE OF URGENCY, THAT WAS
SHARED TODAY IN TERMS OF HOW THE
STATE MUST WORK AND WHAT
PARTNERS WE NEED IN OUR STATE
PENSION FUNDS TO ACCOMPLISH THE
GOALS THAT WE ALL KNOW ARE LIFE
OR DEATH FOR OUR STATE, I WANT
TO PERSONALLY JUST SAY IT WAS
GOOD TO HEAR, WORKERS AND UNIONS
, HOLDING THE PENSION FUNDS
ACCOUNTABLE FOR HOW THEIR
DOLLARS WILL BE SPENT. IT WAS
ALSO ENCOURAGING TO HEAR THAT
PENSION FUNDS RECOGNIZE HOW
IMPORTANT THEIR ROLE IS IN
ENSURING HIGH ROAD INVESTMENTS
AND ACCOUNTABILITY. AS WE LOOK
AT THIS CLIMATE CRISIS, I WANT
TO THANK MY GOOD CO-CHAIR OF
THIS MEETING, CHAIRWOMAN,
ASSEMBLY MEMBER MCKENNA, FOR HER
ROLE IN NAVIGATING WHAT COULD
HAVE BEEN A VERY CONTENTIOUS
CONVERSATION. BUT I FELT LIKE IT
WAS A PRODUCTIVE CONVERSATION
THAT HELPED US GET THE ISSUE ON
THE TABLE AND TO FIGURE OUT OUR
WAY FORWARD. AND WE LOOK FORWARD
TO THE NEXT TIME THAT WE COME
AND WE WILL BE STRONGER AND
BETTER THAN WHERE WE ARE TODAY.
THAT IS MY HOPE AND MY
COMMITMENT AS A LEGISLATURE TO
MAKE SURE THAT CALIFORNIA MOVES
FORWARD FOR A CLEANER, GREENER
AND SAFER, CLIMATE FOR ALL OF US
. THANK YOU. THANK YOU, MADAM
CHAIR, THANK YOU, SENATOR, FOR
COMING OVER HERE TO OUR CHAMBER.
WE APPRECIATE YOUR LEADERSHIP,
IN THIS ISSUE. AND AGAIN, I
THANK YOU, I WANT TO THANK EACH
AND EVERY ONE OF OUR EXPERT
PANELISTS FOR BEING WITH US
TODAY, TO SHARE INCREDIBLY
IMPORTANT INFORMATION REGARDING
THE FINANCIAL STATUS OF OUR
STATE PENSION SYSTEM AND THEIR
EMERGING CLIMATE INVESTMENT
INITIATIVES. THE SUBJECT OF
CLIMATE CHANGE IS CONTROVERSIAL
AND HIGHLY POLITICIZED, BUT IT
IS EXTREMELY IMPORTANT, ONE,
BASED ON THE SIMPLE FACT THAT
CLIMATE ITSELF AFFECTS EVERYONE
AND EVERYTHING ON OUR PLANET.
AND IN CALIFORNIA, THE EFFECTS
OF CLIMATE CHANGE ARE
INCREASINGLY EVIDENT. I FOUND
ALL OF THE INFORMATION PRESENTED
HERE TODAY EXTREMELY VALUABLE
AND POSITIVE. IT SHOWS THAT A
TREMENDOUS AMOUNT OF TIME,
EFFORT AND RESOURCES THROUGH
DEEP RESEARCH AND ANALYSIS BY
THEIR OWN EXPERTS AND THE
DECISIONS OF THEIR RESPECTIVE
BOARDS, HAVE FURTHER MOTIVATED
THE SYSTEMS TO MOVE IN A
DIRECTION TO HELP AFFECT
MEANINGFULLY CHANGE IN THIS
SPACE. AND WITH A WITHIN A
COMPLEX ENVIRONMENT THAT HAS
BOTH OPPORTUNITY AND RISK, WHICH
DEMAND ATTENTION TO DETAIL AND
MONITORING BASED ON A PRIME DUTY
OWED SPECIFICALLY TO PENSION
SYSTEM MEMBERS. IT'S NOT WITHIN
CALPERS AND CALSTRS LEGAL DUTY
TO INVEST, TO SOLVE THE CLIMATE
CRISIS. BUT TO ME, THE ACTIVITY
AND MEANINGFUL, MEANINGFUL,
PRESENCE TO PRESENTS TODAY THAT
THEY'RE TAKING PLANS TO, THAT
THEY SHOULD TO RECOGNIZE AND
APPRECIATE THAT WE HAVE CLIMATE
CHANGE. THEIR STRATEGIES WILL
ALIGN WITH AND ASSIST THE STATE
TO ULTIMATELY ACHIEVE ITS
OVERALL CLIMATE GOALS, WHILE
BALANCING THE LONG TERM
FINANCIAL STABILITY OF THE
SYSTEM AND PROVIDING RETIREMENT
BENEFITS TO THEIR PRESENT AND
FUTURE RETIREES. I'M EXCITED.
ABOUT WHAT ABOUT WHAT I'VE HEARD
TODAY REGARDING THESE EFFORTS,
AND AS THEY CONTINUE THEIR WORK
ON THIS FRONT, I LOOK FORWARD TO
MONITORING THAT PROGRESS. I ALSO
WANT TO THANK MEMBERS OF BOTH
COMMITTEES WHO'S NOT HERE NOW,
BUT I HOPE YOU CAN SEE ME ON TV
LAND TODAY FOR JOINING US AND
LISTENING. BEFORE I WRAP UP MY
CLOSING REMARKS, I WANT TO TAKE
THIS OPPORTUNITY TO PUBLICLY
RECOGNIZE AND THANK CHRISTOPHER
ALTMAN, THE CHIEF INVESTMENT
OFFICER OF CALSTRS, WHO WILL BE
RETIRING ON JUNE 30TH THIS YEAR
AFTER NEARLY 24 YEARS OF
FAITHFUL AND EXCELLENT SERVICE
TO CALSTRS AND ITS MEMBERS.
THANK YOU, CHRIS, COULDN'T BE
HERE TODAY. BUT FOR THOSE WHO
DON'T KNOW, CHRIS IS A RENOWNED
EXPERT AND WELL RESPECTED VOICE
REGARDING INVESTING AND THE AND
THE FINANCIAL MARKETS INDUSTRY.
ANNUALLY, HE HAS BEEN NAMED
AMONG THE TOP 100 GLOBAL CIOS,
NAMED CIO OF THE YEAR IN
MULTIPLE PUBLICATION, CHAIR, AND
CO-CHAIRED OR BEEN A BOARD
MEMBER OF VARIOUS INVESTOR
GROUPS. RECEIVED TWO LIFETIME
ACHIEVEMENT AWARDS FOR HIS WORK.
BEEN A REGULAR GUEST ON CNBC AND
BLOOMBERG TV, AND IS ONE OF THE
LONGEST SERVING CIOS IN THE
COUNTRY. CHRIS, IF YOU'RE
WATCHING THIS HEARING,
CONGRATULATIONS ON YOUR UPCOMING
RETIREMENT AND TRY NOT TO BE
LIKE ME AND GO GET ANOTHER JOB,
I'LL NOW WELL, MY CO-CHAIR HAS
ALREADY SAID THANK YOU. I ALSO
WANT TO THANK EVERY SINGLE ONE
OF THE PUBLIC THAT CAME IN AND
TESTIFIED AND GAVE THEIR
REMARKS. I WANT TO LET YOU GUYS
KNOW WE HEAR YOU. WE SEE YOU. I
THINK THE BOARD ALSO HEARS AND
SEE YOU, AND YOU CAN TELL BY
THEIR ACTION AND THEIR
INVESTMENT AND HOW THEY'RE
TURNING TOWARDS, HELPING TO
COMBAT CLIMATE CHANGE. BUT I
ALSO WANT TO THANK EVERYBODY
THAT'S HERE IN THE BACK TO
EVERYBODY THAT CAME IN. THANK
YOU SO MUCH FOR YOUR TIME. CAN'T
WAIT TO WORK WITH YOU. THANK
YOU. AND THIS MEETING IS
ADJOURNED. RIGHT YEAH.