Working Papers

Does Divestment Fulfill Fiduciary Duty?


This study addresses the question of whether fossil fuel divestment as specified in SB 252, the state legislation requiring CalPERS and CalSTRS to divest from certain fossil fuel companies, upholds or violates the pension funds’ fiduciary duty. We discuss the specific legal standards faced by the funds, and then analyze the economic and financial trends that should inform trustees’ compliance efforts. After presenting evidence that divestment supports fiduciary duty, we detail findings that CalPERS’ business as usual, including its historic and current shareholder engagement practices, could be seen as a violation of fiduciary duty in the absence of further action.