Climate Change – Part 2

Published 1:30 am Monday, April 20, 2026

By Jeff Johnson

past president of the Washington State Labor Council, co-president of the Puget Sound Advocates for Retirement Action and president of the SJI Farmers Market

Despite accelerating climate chaos and the negative impacts that it has caused in human suffering, loss of biodiversity, and economic and geopolitical instability, the financial industry continues to invest trillions in the fossil fuel industry. Even the Washington State Investment Board (WSIB), which manages $230 billion in assets, including 18 pension funds, 6 Labor and Industry funds, and 16 University funds, has about $8 billion in public equities invested in fossil fuel production and supply companies. Most of us have heard of some of these, like Exxon Mobil, Shell, ConocoPhillips, and Peabody Coal. Some, like Chinese coal company Shenhua Energy, not so much.

Washington State law states that the WSIB’s “primary investment objective is to maximize returns at a prudent level of risk for the exclusive benefit of fund participants and beneficiaries.”

Once blue-chip investments, fossil fuel assets have underperformed the returns of the non-energy Standard and Poor 500 equities for the past decade. Over this time, non-fossil fuel assets have performed four times better than coal, oil, and gas assets. And since 2022 the stock market, as measured by the S&P 500, has nearly doubled (92%) while the value of fossil fuel assets has risen only 17%. While past performance is not always an indicator of future performance, the fossil fuel sector is facing long-term competition from renewable energy, and electrification, as well as growing regulatory, market and judicial risks from the damage caused by climate change. Other than through exogenous supply price shocks from Putin’s invasion of Ukraine and Trump’s war of choice with Iran, the value of fossil fuel assets would appear to be in long-term decline.

A reality check would suggest that fossil fuel assets no longer help the WSIB maximize returns on their portfolio and that continuing to invest in fossil fuels creates an imprudent level of risk. Nonetheless, the WSIB is reluctant to divest its holdings in fossil fuels. In January, the WSIB argued before the Washington State Ways and Means Committee that “any restraint on an asset class (fossil fuels) will likely lower returns and raise transaction costs… and corporate engagement is really the way to move the needle – you give up your voice if you give up ownership in these stocks.” Two major financial management firms, Blackrock and Meketa, independently concluded that investment funds have suffered no negative financial impacts from divesting from fossil fuels, in reports done at the request of New York City’s Comptroller for the city’s three pension funds. Transaction costs might rise a bit if you ask a traditional fund to customize or rebalance your portfolio away from fossil fuels. On the other hand, higher returns from non-fossil fuel assets should more than compensate for higher transaction costs.

If you had invested in one of the top-performing sustainability funds (no fossil fuels) over the past decade, you would have received an annual rate of return of 13.6%, outperforming the WSIB’s ten-year average rate of return of 9.6%. Corporate engagement through shareholder proxy votes is important. Renewable clean energy transition plans can be developed and put in place through proxy voting. This is more likely accomplished in non-fossil fuel companies. It is much harder to do in fossil fuel companies that have every incentive to continue extracting and marketing oil, gas, and coal. And the history of corporate engagement over asbestos and tobacco brings into sharp relief how slow and incomplete this process can be.

With global temperatures rapidly rising and climate disasters intensifying, we don’t have the luxury of time. We need both engagement and divestment strategies. Corporate engagement without any teeth to back it up is just a discussion.

It is time for the WSIB to divest from all of their holdings in fossil fuel producers and suppliers. This will send a strong and clear message to other institutional investors that you can maximize pension and state fund returns by investing in life affirming assets at prudent levels of risk and help save the planet at the same time.