A new report shows that a Californian pension fund’s sustainability portfolio contains ownership stakes in oil producers – including the likes of Chevron and Saudi Aramco. This confused its beneficiaries. Maybe the fund was confused itself.
The report was written by California Common Good, a coalition of environmental advocates and public sector unions. In the report, analyses show that California Public Employees’ Retirement System fund had labeled several carbon emitters as “climate solutions”. In the past, California Common Good and state lawmakers had pressured Calpers to fully divest oil and gas holdings from its climate solutions portfolio, Bloomberg reports. Now, data and analysis back up the coalitions’s argument in the new report, published on March 5th on California Common Good’s website.
Calpers is the United States’s largest publicly funded pension fund, managing $214 billion in equity holdings. Of of the total holdings, $26.1 billion are classified as “climate solutions”. And according to California Common Good’s report, 52 of the world’s largest GHG emitting companies are now also classified as “climate solutions” by the fund.
The ironic portfolio exists at a time when major US banks have been either pulling out of the Net-Zero Banking Alliance or relaxing the sustainability goals of their investments. Meanwhile, oil and gas producers have been investing more in fossil fuels.
Calpers’s approach is to first invest in lucrative stock and thereafter designate a percentage of the holding as the “climate solution”. For example, Calpers made a 99-1 split on its holdings in Saudi Aramco, with only 1 percent designated as the “climate solution.” How much of a holding is climate friendly stems from data provided by the FTSE and HSBC and MSCI. These organizations provide analytics that quantify companies’ green business activity.
It’s not that Calpers is tone deaf to climate activism. In fact, the opposite is true. In December it down-rated ExxonMobil’s sustainability classification by 98 percent.
But the criteria for classifying a holding a “climate solution” was and is still not entirely clear. At the time of the ExxonMobil reclassification, Marcie Frost, chief executive officer of Calpers, said in a statement that it is “more art than science in defining an investment as a ‘climate solution'”.
Both ExxonMobil and Chevron had been bullish on clean tech since the onset of the net zero movement. Five years ago, the companies had heavily invested in hydrogen and carbon-capture technology. But in the last year, they have accelerated spending in fossil fuels, in line with the rest of the oil and gas industry. The companies are large carbon emitters, which makes one wonder how they ended up on the climate-friendly list, at first glance.
If looking to Europe as an example, sustainability reporting mandates might hold a solution to the confusion. Pushing companies to publish the right data might help someone decide if they are climate friendly or not. With clear data points across entire industries, mandated frameworks have the potential to prove whether climate action is having the desired effect.
Take Norway, for instance. In 2024, cancellations of Guarantees of Origin in Norway reached record highs, according to an analysis by the Norwegian renewables firm Ecohz. These GOs certify green energy consumption within Europe. One cancellation gives ownership of 1 MWh of clean energy back to a consuming organization. One notable example is NorskHydro, who, in its 2024 sustainability report, explained it would cancel its GOs to cover its own electricity consumption – in line with the EU’s Corporate Social Reporting Directive.
That GO cancellations are discrete events make them easily reportable and, therefore, trackable. And that we are learning of these cancellations now is not random. The data coincides with the first ever reporting cycle of the CSRD.
Reporting frameworks in the US face a double whammy of pushback these days. They are still voluntary. To boot, the current administration is waving the threat of legal action around its contractors. Government contractor companies are starting to remove the word “climate” from its public documentation.
Maybe part of removing the confusion around what constitutes sustainability is mandating some framework around it. The state of California has two reporting frameworks set go “live” in 2026: the SB 253 and SB 261.
I’m tuned into what California does from now on. Did you hear that Gavin Newsom launched a podcast?