Senate President Pro Tem Kevin de León said Monday that he will propose legislation requiring California’s massive pension funds to divest their holdings in coal.
The proposal, which de León said he would submit in January, comes amid pressure from environmentalists for governments to eliminate fossil-fuel investments from their portfolios. While divestment has been seen since the time of apartheid as a largely symbolic measure, it can raise awareness and exert pressure on large institutions.
If approved, de León’s divestment plan would affect the California Public Employees’ Retirement System and California State Teachers’ Retirement System.
“Coal is a dirty fossil fuel,” de León said. “I think that our values should reflect, you know, who we are as the state of California.”
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It was unclear how far-reaching the proposal might be, or what firms other than coal-mining companies, if any, might be affected. The Los Angeles Democrat said he is “going through all of those details right now” and that “once we get down deeper in the weeds we can tell you how far it goes.”
He said his proposal will not extend to petroleum and gas.
Coal is a relatively small source of power in California, generating less than 8 percent of electricity system power statewide in 2013, according to the California Energy Commission.
De León’s proposal came at a conference on climate change in Oakland and was met by a sympathetic audience. Democratic officeholders, including Gov. Jerry Brown, cast California in familiar terms as a leader on climate change, and de León called for the state to “lead again” in divestment.
“With coal power in retreat and the value of coal dropping considerably, it’s time for us to lead again in moving our massive state portfolios to lower-carbon investments,” he said to applause. “Divestment is about matching your values with your investment strategy and still seeing a positive financial return.”
Jim Evans, a spokesman for the governor, said in an email, “Given the serious challenge of climate change, this proposal deserves careful consideration.”
CalPERS reacted to de León’s statements with an emailed press statement highlighting its “proven track record of tackling climate-change issues,” without saying whether it agreed with the senator’s position.
The fund said it is working “aggressively” with investors to “engage with the 45 largest fossil-fuel companies” to manage climate-change risks.
Earlier this year, in July, CalPERS said of divesting from fossil fuels that “an engagement process” with energy companies is preferable to “walking away.”
CalPERS has committed $600 million since 2007 to investments in clean energy, clean water, air-purification technologies and other environmentally friendly efforts, according to its website. By comparison, its $291.8 billion portfolio includes holdings in approximately 30 coal-producing companies with a combined value of $167 million, according to CalPERS’ data.
At the teachers’ retirement system, CalSTRS communications strategist Gretchen Zeagler said in an emailed statement that carbon-fuel assets “are a substantial component in our portfolio of investments.” The fund plans to more than double its clean energy investments to $3.7 billion over the next five years. CalSTRS has about $187 billion in assets.
De León’s plan to require funds to dump their coal investments ramps up pressure that the state’s public pension funds have ignored so far. The cities of Berkeley, Oakland and Richmond, whose pensions are administered by CalPERS, reportedly asked the fund to divest from fossil fuels. Nothing came of it.
Students and professors in the University of California system also pressed for a similar pension-fund investment ban this summer. Instead, the UC put more money into clean energy.
Reacting to similar pressure on the other side of the country, Drew Faust, president of Harvard University, said in an open letter last year that divestment from the fossil-fuel industry is unwarranted.
Among other objections, Faust said divestment “is likely to have negligible financial impact on the affected companies” and that the university “should favor engagement over withdrawal.”
“In the case of fossil-fuel companies, we should think about how we might use our voice not to ostracize such companies but to encourage them to be a positive force both in meeting society’s long-term energy needs while addressing pressing environmental imperatives,” Faust wrote.
Still, fossil-fuel divestment has gained some ground. Stanford University’s endowment has jettisoned its holdings this year. San Francisco State University’s $55 million privately-run foundation also began withdrawing investments in fossil-fuel companies this month. Union Theological Seminary in New York this summer announced it also would divest.
CalPERS has bowed to political and legislative pressure to dump certain holdings. In 2013, it wound down its investments in manufacturers of assault weapons, for example. Before that, the fund sold off investments in companies doing business in Sudan and some firms doing business with Iran. In 2000, the CalPERS board got out of tobacco.
Republican lawmakers did not immediately react to the proposal. A spokesman for the Senate Republicans said GOP lawmakers had not yet seen it.
In a lobby of the building where de León spoke, Art Pulaski, executive secretary-treasurer of the California Labor Federation, was noncommittal about the proposal.
“That’s a challenging question because we don’t represent any coal miners in California,” he said, adding that “coal miners around the country are really concerned about (divestment).”
Call David Siders, Bee Capitol Bureau, (916) 321-1215. Follow him on Twitter @davidsiders.