California Requires State Pension Funds to Divest Coal
On October 8, California Gov. Jerry Brown (D) signed into law a requirement that the nation's two largest public employee pension plans must divest holdings in companies generating 50 percent or more of their revenue from coal mining. S.B. 185 gives the California Public Employees' Retirement System (CalPERS) and the California State Teachers' Retirement System (CalSTRS) until July 1, 2017, to sell holdings in companies that produce thermal coal, or coal used by power plants. Combined, the two funds manage about $476 billion in assets. As of June 30, CalPERS had investments in about 27 thermal coal companies with a portfolio valued at about $57 million, the pension fund said.
The new law will make CalPERS and CalSTRS the first statewide pension funds in the U.S. to divest from fossil fuel-related holdings, according to the Carbon Tracker Initiative, a London-based group that focuses on the risks of investments in fossil fuels. Enactment of the law marked a victory for environmental groups advocating for institutions to divest their investments in fossil fuel companies.
Under S.B. 185 the CalPERS and CalSTRS boards of directors must “constructively engage with thermal coal companies” to determine if they are transitioning their businesses “to adapt to clean energy generation.” The bill gives pension fund managers the flexibility of not liquidating a coal mining asset if doing so would violate their fiduciary responsibilities. CalPERS will immediately begin “to engage” with the thermal coal companies in its investment portfolio on climate risks, a first step required under the new law, the pension fund said in an October 8 written statement. CalPERS and CalSTRS have until Jan. 1, 2018, to submit reports to lawmakers identifying all the coal mining holdings liquidated or those not sold. The text of S.B. 185 is available at http://www.leginfo.ca.gov/pub/15-16/bill/sen/sb_0151-0200/sb_185_bill_20150602_amended_sen_v96.pdf.