California Lawmakers Seek to Divest Public Pension Funds From Fossil Fuel

Oil pumpjacks in the Inglewood Oil Field in Los Angeles, Calif., on Jan. 28, 2022. (Mario Tama/Getty Images)

A bill requiring California’s two largest public pension funds to divest from fossil fuel companies is quickly making its way through the state Legislature despite opposition from the state funds.

Senate Bill 252, introduced by state Sens. Lena Gonzalez (D-Long Beach), Henry Stern (D-Calabasas), and Scott Wiener (D-San Francisco), would prohibit the boards of California Public Employees’ Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS) from making new investments or renewing investments in fossil fuel companies.

The legislation is part of a Climate Accountability Package that mirrors a national climate justice movement.

“For far too long, corporations have profited at the expense of low-income communities of color who have to struggle with the harmful impacts of their polluting operations,” Gonzalez said in a February release.

Funds Oppose Bill

The state retirement systems—with a combined $15 billion in global fossil fuels investments—publicly oppose the measure that requires them to withdraw their funds from the companies by 2031.

“As a global investor, directed by the California Constitution to carry out a fiduciary duty to its members and employer partners, CalPERS does not believe that mandatory fossil fuel divestment is an effective solution to the reduction of greenhouse gas emissions,” CalPERS said in a statement. “Divestment has little—if any—impact on a company’s operations and therefore does nothing to reduce greenhouse emissions.”

CalSTRS also opposes the bill because it infringes on the constitutional authority of the board to administer retirement plans and investment authority, a CalSTRS spokeswoman told The Epoch Times.

A Senate Committee on Labor, Public Employment, and Retirement analysis found the bill would likely conflict with the pension boards’ fiduciary duty, claiming it interferes with their professional investment judgment.

“Moreover, it does so in a manner that is unlikely to achieve its objectives because there continues to exist substantial market support for energy companies, both domestically and internationally,” according to the analysis.

Beyond requiring divestment, the measure would also mandate the state funds to submit yearly reports to the governor and the Legislature on the status of any fossil fuel company holdings and divestments beginning Feb. 1, 2024.

Union Support

Nearly 150 Californians called in testify in support of SB 252 during its committee hearing April 18 in the Senate Judiciary Committee, according to one of the bill’s sponsors, Fossil Free California, an activist organization working to end financial support for fossil fuels in the state.

“Union members, workers, retirees, and pension members have made it clear: we want out of fossil fuel investments and we want out yesterday,” Miriam Eide, coordinating director for Fossil Free California, said in a statement.

A coalition of unions made up of educators, the California Faculty Association that also sponsored the bill, and the California Nurses Association also support the measure, the legislative analysis reported.

The bill has passed two Senate committees this month and now heads to the Senate Appropriations Committee before it can be considered by the whole chamber. Then, it would need to pass through a similar process in the Assembly.

The same bill died last year when it was tabled in the state Assembly. Former Democrat Assemblyman Jim Cooper, a committee chair, said it wasn’t the right time to consider political divestment proposals that hurt the financial security of California’s pension systems, according to the League of California Cities.

If passed, California’s retirement systems would follow moves already made by the University of California and California State University. The universities announced in 2020 and 2021 respectively that they would withdraw investments in fossil fuels to shift to renewable energy sources. The University of California divested $1 billion, and the California State University was expected to cancel $5.2 billion in investments, according to statements.

Climate Package

In addition to this bill, the senators’ climate package also includes Senate Bill 253, called the Climate Corporate Data Accountability Act, sponsored by several environmental groups. The bill would require all U.S. companies that make over $1 billion a year and do business in state to annually report their greenhouse gas emissions to the California Air Resources Board (CARB).

Another bill in the package is Senate Bill 261, the Climate-Related Financial Risk Act, would be the state’s version of the controversial Environmental, Social, and Governance (ESG) reporting. This bill would require all companies with revenue exceeding $500 million annually that do business in the state, except insurance companies, to report their climate-related financial risk to CARB.