California’s public pension funds lost $5 billion last year through declines in their fossil fuel investments, according to a new report from Trillium Asset Management.
The losses for CalPERS and the California State Teachers’ Retirement System were largely due to the price of coal and oil falling between July 2014 and June 2015, the group found. The report comes amid increasing calls — and proposed legislation — for fossil fuel divestment.
“It’s important to see that fossil fuels in general, and coal in particular, are risky bets for the pension system,” Brett Fleishman, a senior analyst with 350.org, which advocates for divestment, said in a statement. “When folks are saying divestment is risky, we can say, ‘Well, not divesting is risky.’”
California State Senate President Pro Tem Kevin De León (D) introduced a bill earlier this year as part of the Senate’s “climate package” that would require both funds to divest from companies that derive at least half their revenue from coal mining. The package passed the state Senate in the spring, and de León’s bill, S.B. 185, is expected to be considered by the Assembly later this month. The two funds represent pensions for nearly 2.6 million Californians.
Trillium’s analysis found that the coal stocks in the funds declined 25 percent during the 12-month period.
“These freshly incurred losses starkly demonstrate coal’s financial risk, and illustrate the potential benefits of S.B. 185 to California pensioners,” Will Lana, a partner at Trillium, said in a statement. Trillium is an employee-owned investment management fund with an emphasis on sustainable and responsible investing.
Coal in particular has been experiencing a long decline. Efforts to curb carbon emissions from the electricity sector — about 77 percent of which come from coal-fired power plants — have made investing in coal generation risky and expensive. Meanwhile, the industry has struggled to compete against the natural gas boom. Several coal companies declared bankruptcy in the past year alone.
California’s pension funds would hardly be the first major holdings to move away from coal. Several universities, religious groups, and even a major insurance company have all stopped investing in coal. The Norwegian parliament voted in June to remove coal investments from that country’s public pension fund, thought to be the largest sovereign wealth fund in the world.
Divestment is seen by some as one of the most effective ways of reducing the profitability of fossil fuel industries.
Ted Nace, founder of CoalSwarm, an open-source reference on coal and an Earth Island Institute project, told ThinkProgress that finance has been an important driver in the cancellation of new coal plants worldwide. “The international community has very much been a factor in the slowdown, through finance,” he said in March. “The divestment movement has been a large part of what’s created a negative business climate for coal investment.”
The Trillium report may help build momentum for the divestment movement in California.
“On behalf of teachers across the state, I have been urging CalSTRS to take our investments out of fossil fuels,” Jane Vosburg, a California State Teachers’ Retirement System member and organizer with Fossil Free California, said. “Financial experts have long warned about the high risk of fossil fuel investments. Teachers’ pension funds should not be invested in an industry that threatens human civilization. Morally, divestment is the right thing to do; financially it’s the smart thing to do.”