The best way California can hurt Russia? Stop investing money in oil and gas companies

It’s not easy for an ordinary household to brush off record-breaking prices at the gas pump and soaring heating bills in the wintertime. California residents have been experiencing dramatic increases on everyday costs, and analysts say the state average for a gallon of gas could surpass $5 because of sanctions against Russia.

The international community has condemned President Vladimir Putin’s invasion of Ukraine and choked off vital banking and energy sectors that prop up the Kremlin. The fallout has been felt around the world, including in California. The two largest pension funds in the country, which serve public workers in government and education, have nearly $2 billion invested in the Russian economy.

The California Public Employees’ Retirement System and California State Teachers’ Retirement System respectively face roughly $900 million and $800 million of exposure to Russia, according to recent statements and a Reuters analysis. Surely withdrawing investments that support a violent authoritarian regime would be an appropriate response for both agencies. A more prudent move, however, would be to cut financial ties to fossil fuel corporations altogether.

Russia provides 10% of the world’s oil. Putin’s invasion of Ukraine has upended the global supply, prompting the U.S. oil industry to seek rollbacks on drilling restrictions and increasing demand for exports to Europe. Enabling deeper investment in oil and gas producers is a stopgap to stabilize global supply chains and avoid greater inflation. But it must not be the long-term solution when it puts younger generations at risk of future geopolitical uncertainty and climate-worsened disasters.

California has traveled this road before. During record-breaking heat waves last summer, Gov. Gavin Newsom authorized natural gas plants to generate as much electricity as possible to avoid blackouts. Without greater in-state clean energy supply, some scientists and think tanks have advocated keeping the Diablo Canyon nuclear power plant open past its planned closure date in 2025.

Divesting from oil and gas companies has been a needlessly controversial topic. The California Democratic Party recently banned contributions from most fossil fuel companies, but its plan to do so is riddled with loopholes after months of debate about how it could deliver on the long-sought promise.

CalPERS has resisted similar calls, instead preferring to push for change at the shareholder level in companies such as ExxonMobil. This overly optimistic strategy ignores the fact that ExxonMobil deployed high-level propaganda for decades, deflecting accountability for its outsize role in damaging the atmosphere to consumers. An astonishing study by Harvard last year detailed how the company had copied tobacco industry tactics and used the subtle politics of language to shift blame.

Unfortunately, California’s giant retirement agencies downplay their ability to influence this market. In ignoring calls to divest and sticking with untrustworthy companies, they expect their members to overlook their shared goal with fossil corporations: achieving maximum returns.

CalSTRS, which has about $320 billion in assets, has investments in nine Russian local sovereign bonds and fossil fuel companies like Gazprom and Lukoil, whose chairman suffered the greatest losses of any Russian billionaire under the new sanctions.

In a statement to The Bee’s editorial board, CalPERS CEO Marcie Frost expressed support for the Ukrainian people and condemned the attacks as “unjustified and unprovoked.” She said the agency’s investments in Russia account for less than 1% of its total portfolio, but added that CalPERS is “monitoring current events and will take action as appropriate to protect the interests of our members.”

Withdrawing California’s investments in Russian companies is not a simple fix and will likely have a limited impact. But retirees, future members and residents across the state are looking for institutions like CalPERS and CalSTRS to be vigilant with their financial ties when democratic ideals are under siege.

For decades, fossil fuel companies have shown they cannot be trusted. They have infiltrated every corner of our society and exploited every attempt to regulate them. A new report found that California’s lauded cap-and-trade program was being manipulated by companies that stashed pollution credits, allowing them to maintain carbon emissions and impede state climate goals. These are bad-faith actors who think the rules do not apply to them.

A hastened transition to widespread wind and solar power will not just benefit the environment and help achieve energy independence; it also could be a serious blow to a global enemy. At the very least, it will reduce our reliance on expensive gasoline. That’s something every Californian should be willing to get behind.