Open Letter to CalPERS and CalSTRS

Call to hold Exxon accountable for threats to shareholder rights & climate destruction

Dear CalPERS and CalSTRS Boards of Trustees and Staff, 

We are writing to urge CalPERS and CalSTRS to hold Exxon accountable for its unprecedented and extreme lawsuit against its shareholders and its ongoing undermining of the efforts to fight climate change.  

Climate change poses an existential threat to pension benefits. Unions have fought hard to win and maintain retirement security for members. Still, failure to address climate change and continued investment in fossil fuels undermines pension funds' strength, predictability, and ability to fulfill responsibilities to beneficiaries. Additionally, ensuring that workers’ pension funds proactively work to mitigate climate change is in the core self-interest of all fund participants—current and future—and these actions benefit the greater public. 

We know that both CalSTRS and CalPERS understand this threat. In its commitment to net zero emissions, CalSTRS states: “We believe climate change is one of the greatest threats to our future, with undeniable links to business and financial investments. Climate change impacts health and safety, the environment and the global economy, which puts the CalSTRS Investment Portfolio at risk.”

CalPERS’ sustainable investment program is based on the acknowledgment that “as an investor in the global economy, the scale and multi-faceted nature of climate change presents a systemic risk to our portfolio.” We thank the CalPERS Board of Trustees for hearing public comments about the threat of Exxon’s actions to shareholder rights at the March Board Meeting and for echoing our concerns. In particular, we want to uplift Board President Theresa Taylor’s request for an engagement and accountability plan.   

But Exxon’s actions against shareholders Follow This, and Arjuna Capital require immediate action to protect retirement security. We ask that CalPERS and CalSTRS predeclare a vote against Exxon's Board of Directors and stop purchasing Exxon’s bonds. 

What Has Exxon done? 

ExxonMobil has set a dangerous precedent that may discourage shareholder democracy across the board and stifle engagement on investor concerns, from climate impacts to worker rights. The shareholder proposal that sparked the lawsuit asked Exxon to set medium-term emissions reduction targets, which is not only a common shareholder request but would catch the major oil companies up to their peers. Instead of using the established regulatory process for challenging proposals or defending its lack of a transition plan and facing a vote, Exxon has gone after the rights of shareholders.

CalPERS has already established that climate change poses a significant risk to workers’ retirement savings. The fund’s Sustainability Plan has outlined several strategies to address and mitigate these risks, including a commitment to “enhanced” engagement with portfolio companies. Exxon has presented a test of this commitment: How will CalPERS defend the voice of California public employees and protect their retirements?  

CalSTRS’ Sustainable Investing Plan incorporates company engagements to “speed up the [climate] transition” and lists past successes, including at ExxonMobil. CalSTRS notes that previous commitments from the major oil companies are limited and exclude Scope 3 emissions, which represent greenhouse gas emissions from using their products and the bulk of Exxon’s pollution. How will CalSTRS defend its ability to engage for more robust climate policies? 

As stated by Illinois State Treasurer Michael Frerichs in a recent op-ed in the Houston Chronicle: “The perils for diversified shareholders, who suffer lasting economic harm when individual companies prioritize their own short-term cash flows over the health of the critical systems upon which our economy relies, are all too apparent.”

What can CalPERS and CalSTRS do? 

As part of Climate Action 100+, CalPERS and CalSTRS are influential amongst peers. CalPERS is co-lead for shareholder engagement with Exxon. The steps CalPERS and CalSTRS take will resonate throughout investor spheres. We urge CalPERS and CalSTRS to:

1. Vote against the Exxon Board of Directors at this May’s shareholder meeting.

2. Announce the funds’ voting intentions publicly by filing exempt solicitations.  

3. Begin a process for exiting Exxon, beginning with bonds. 

It’s important that Exxon’s Board of Directors be held accountable for the company’s extreme actions and that new investments be withheld unless that company presents a serious climate transition plan.