The Legislature proposal in SB 252 this year would have required the California Public Employees’ Retirement System (CalPERS) and the State Teachers’ Retirement System (CalSTRS) to stop investing in fossil fuels as of January 1, 2024, and to sell their remaining fossil fuel investments by the 2030, if consistent with their fiduciary duty. (The Legislature is allowed by the California Constitution prohibit certain investments by these retirement boards, where it is in the public interest to do so, provided that the prohibition satisfies the standards of fiduciary care and loyalty owed by the boards to pension plan participants. (Cal. Const., art. XVI, § 17.) ) The bill would also require annual reporting on fossil fuel holdings.
The bill noted that the combustion of coal, oil, and natural gas, known as fossil fuels, is the single largest contributor to global climate change, and that fossil fuel companies’ plans to expand production, public relations campaigns, and efforts to obstruct climate stabilization policies are incompatible with California’s climate goals, and our obligation to current and future generations. The idea behind the bill is that, to meet our zero carbon goals, money needs to move from funding fossil fuel infrastructure and instead be invested at scale in clean energy. CalPERS has investments of $9.4 billion currently in fossil fuels.
The bill was blocked by the chair of the Assembly Committee on Public Employment and Retirement–Senator Lena Gonzalez (D-Long Beach). CalPERS specifically expressed strong opposition to the bill. In its message to the public, expressed both on its website and in mailers sent to public employees, presumably in the thousands, CalPERS noted that divestment would not be consistent with its fiduciary duty. The logic there is circular in as much as the condition for divestment under SB 252 is that divestment be consistent with the fiduciary duty.
In point of fact, CalPERS appears to have a divestment policy to oppose all calls for divestment that are not “investment related.” CalPERS opposes the potential lost investment performance and the transaction costs associated with divestment. It’s divestment policy states that its fiduciary obligations require it to oppose this and all other divestment initiatives by the Legislature: “However, fiduciary obligations generally preclude CalPERS from sacrificing investment performance for the purpose of achieving goals that do not directly relate to CalPERS’ operations or benefits.”
CalPERS also may have been opposed to the limits on future investments as well as the requirement to report on the scale of its investments in fossil fuels on a regular basis.
The proposal is up for reconsideration next year.