California Passes Bill To Force Two Biggest Pension Funds To Divest From Coal

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The California State Assembly has passed a bill, SB 185, which will force the state’s two largest pension funds to divest their holdings in thermal coal.

SB 185

The bill, which was passed on Wednesday by a vote of 47-27, requires the California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) to divest their holdings in companies that receive at least half their annual revenue from coal mining.

California assemblyman Rob Bonta presented the bill before the assembly, and said in a read statement that SB 185 “aligns our investment policies with our values.”

“According to CalPERS, its portfolios currently contain approximately 30 coal mining producing companies valued at $167 million,” Rob Bonta continued on the assembly floor, reminding the assembly that CalPERS is the United States’ largest public pension fund, with assets totaling $295 billion.

If signed into law by Governor Jerry Brown, SB 185 — also known as “Investing with Values and Responsibility” — will make California the first US state to legislate fossil fuel divestment, a model many organizations (including Fossil Free California) hope other states and nations worldwide will follow.

“Coal is losing value quickly and investing in coal is a losing proposition for our retirees; it’s a nuisance to public health; and it’s inconsistent with our values as a state on the forefront of efforts to address global climate change,” said Senate President pro Tempore Kevin de León, and author of the bill. “California’s utilities are phasing out coal, and it’s time our pension funds did the same.”

The bill was approved on April 13 by the California State Senate Public Employment and Retirement Committee after it was proposed by de León, and has since gone through several other California administrations. In April, the boards of both CalPERS and CalSTRS voted to take no position on SB 185, leaving it up to the legislature to decide.

Too Little, Too Late?

This comes as little surprise, considering the recent report published by Trillium Asset Management, which found that, together, CalPERS and CalSTRS lost over $5 billion in the last financial year due to investments in the world’s largest 200 oil, gas, and coal companies (by carbon reserves).

“These freshly incurred losses starkly demonstrate coal’s financial risk, and illustrate the potential benefits of SB 185 to California pensioners.” said Will Lana, Partner at Trillium Asset Management.

Speaking via email, Ricardo Duran, the spokesman for CalSTRS confirmed that “CalSTRS did not take a position on the bill.”

“We are assessing the level of thermal coal that meets the legislative definition and believe it may be approximately a $40 million holding,” Ricardo Duran continued. “CalSTRS’ preference is always that of engagement.”

“Even before passage of the bill, CalSTRS began its research to evaluate the portfolio for thermal coal holdings. The process began at the Investment Committee’s direction in April 2015. This was the first of a multi-step process to determine the impact of possible divestment. This assessment is expected to take 4 to 8 months.”

Whether any such assessment reaches the same conclusions as those made by Trillium is unclear — especially considering that Trillium revealed that CalPERS and CalSTRS lost a combined $840 million from stock investments in the world’s largest coal companies alone, not to mention other fossil fuel investments. The authors of the report also noted that “the review indicates a 25% decline in the pension’s coal stocks” over the past year.

“Any effort to remove thermal coal from the portfolio must first meet the board’s standard of fiduciary care,” explained Ricardo Duran via email. “CalSTRS’ first priority is, and always has been, safeguarding the financial futures of our members and their families, and to make decisions solely in the interest of our members and their beneficiaries.”

A Positive Response

The news of SB 185’s passing has garnered a lot of approval from those in and around California.

“I wrote the first-in-the-nation resolution calling for fossil fuel divestment, which passed my Ventura County Democratic Party back in 2013, and was ultimately passed by the California Democratic Party this spring,” said RL Miller, cofounder of Climate Hawks Vote and Chair of the California Democratic Party’s environmental caucus. “Though SB 185 is narrower, as it only calls for coal divestment, the work within the state’s Democratic Party has enlightened a lot of activists to the need for full fossil fuel divestment, and SB 185 is the right bill at the right time. Once passed, I expect the bill to unleash a flood of actions in other states with similar bills.”

“Addressing the climate crisis is a moral imperative,” said Jim Miller, member of the American Federation of Teachers, Local 1931 VP/Chair SD-Imperial Counties Labor Council Environmental Caucus. “Although much more still needs to be done, SB 185 and the Climate Leadership Package are an important step in the right direction if we are serious about saving our children’s future.”

Image Credit: via Fossil Free