With help from Anne C. Mulkern and Camille von Kaenel
RISKY BUSINESS: The real-world costs of climate change are forcing California’s biggest public pension system to re-evaluate parts of its massive investment portfolio.
The California Public Employees’ Retirement System for years has resisted activists’ calls to dump all its oil and gas holdings, saying it doesn’t have the luxury of embracing “social responsibility” if there’s a risk to members’ pensions.
But under a proposal published Friday, the system would add new scrutiny of climate risks in its $444 billion portfolio while expanding investments in things like renewable energy, carbon capture and drought-resistant crops.
Inflation Reduction Act incentives, green mandates and the disasters wrought by increasingly extreme weather are changing the economic landscape, creating new opportunities to earn money on climate solutions and new risks of ignoring climate change, said Peter Cashion, the system’s head of sustainable investments.
“Those companies that are planning to transition, those are the ones that we think do have financial prospects and actually should be supported,” Cashion told reporters.
CalPERS over the years has elected to divest from tobacco and assault weapons. The Legislature has ordered it to divest from Sudan, Iran and coal.
But CalPERS has favored engaging with companies as shareholders to try to push environmental, social and governance objectives, rather than selling its securities to investors who might not care about those things. By contrast, New York’s state pension fund decided in 2020 to divest from fossil fuels by 2040.
Today’s proposal provides an avenue to exit investments in companies that don’t adapt.
Under the plan, CalPERS would screen companies’ climate plans under a to-be-determined framework criteria and boost investments in climate mitigation, adaptation and transition by about $53 billion by 2030 (up from around $47 billion today). The fund is aiming to reach a net-zero portfolio by 2050.
Environmental activists who have been pushing CalPERS to drop its fossil fuel investments say it’s still not enough.
“While we welcome CalPERS scaling up climate-safe investments, there’s no room for fossil fuels in any sustainable finance or net-zero plan,” said Miriam Eide, executive director of Fossil Free California, in a statement.
The group has pushed divestment through legislation, most recently Senate Bill 252, by Sen. Lena Gonzalez (D-Long Beach). The bill passed the Senate this year but was held in the Assembly, meaning it could be taken up again next year.
Gonzalez said she was “encouraged” by CalPERS’ move but still pushing for divestment: “I will continue to advocate for divestment via SB 252, because increasingly high-risk fossil fuel investments have no place in the retirement funds of hard-working Californians,” she said in a statement.
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PORT PAYOUT: California ports received some $75 million in federal infrastructure funding today, including money for offshore wind development in Humboldt Bay.
The biggest of the four grants — $53 million — goes to the Port of Long Beach to expand rail and roadway infrastructure around the port and make rail crossings safer. The Redwood Marine Terminal in Humboldt Bay is getting $8.7 million for a heavy-lift facility to support offshore wind farms.
The funding, though, amounts to just 11 percent of the $653 million in fiscal 2023 port infrastructure grants announced today by U.S. DOT — despite the fact that 40 percent of the nation’s imports and 30 percent of exports come through California ports.
State transportation officials, including Port of Los Angeles Executive Director Gene Seroka, traveled to Washington over the summer to ask for a bigger share of port funding, but instead, the state’s share dropped from 15 percent to 11 percent in this round.
When asked about the disparity, DOT Secretary Pete Buttigieg pointed to a 2021 Emerging Projects Agreement between California and DOT that allows state agencies to access federal credit assistance, which he said “reflects the importance of California’s infrastructure and its significance to the American economy.” He also noted that the funding went not just to ocean ports but to inland river ports, where “often comparatively a smaller dollar grant does a very, very long way.”
EV UPS AND DOWNS: U.S. sales of electric vehicles hit a new record this summer, reports Anne C. Mulkern for POLITICO’s E&E News.
As EV prices fall and automakers roll out more models, zero-emission car sales are growing. They reached nearly 8 percent of all new cars bought in Q3, from July to September — up from more than 6 percent a year earlier, according to Cox Automotive.
In California — which has its own state incentives on top of federal ones — 26.7 percent of new cars sold were zero-emission vehicles in Q3. That’s up from 25.4 percent last quarter — and two years ahead of schedule for California’s 1.5 million ZEV goal, Gov. Gavin Newsom’s office noted Thursday.
But it’s not all upward momentum. EV inventory has increased by 271 percent nationwide since last September, but the industry is warning of a potential slowdown, citing supply and price cuts as a sign of a slower market. General Motors, for example, has delayed production of some models and recently canceled plans with Honda to co-develop an affordable EV program.
Some experts say that direct EV rebates soon to go into effect will keep the momentum going, and that the auto industry is trying to warn regulators off of a Department of Transportation proposal to increase fuel economy standards.
“The car companies … they want to push back against the EPA, the unions,” Gil Tal, director of the Plug-in Hybrid & Electric Vehicle Research Center at the University of California, Davis, told Anne. The companies are balancing long-term investments with what they tell Wall Street now, he said, so “that’s why they’re pushing back, not because there is a real slowdown.”
ONE DOWN, THREE TO GO: The Klamath River is now flowing freely through Wards Canyon in Northern California after crews finished removing the Copco No. 2 dam this week as part of the world’s largest dam removal project. The other three dams slated for removal — Copco No. 1, Iron Gate and JC Boyle — will come down next year.
— How UAW’s Shawn Fain robbed the GOP of some talking points by ensuring EVs produce high-paying union jobs.
— California’s biggest landowners are all in forestry or agriculture: learn about them here.
— What lies ahead in the legal battles against Phillips 66 and Marathon, California’s two big biofuel refineries.
