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Governance

CalPERS reveals it divested from most thermal coal companies

CalPERS completed divesting stock in 14 thermal coal companies last month, investment officials disclosed Monday in agenda material for its Aug. 14 investment committee meeting.

It is the first time CalPERS has disclosed that it has divested coal company holdings.

California Gov. Edmund G. "Jerry" Brown Jr. signed into law in October 2015 a bill that requires CalPERS and the $208.7 billion California State Teachers' Retirement System, West Sacramento, to divest from investments in coal companies by July 1, 2017, unless companies could show they were transitioning to a clean-energy future. But the legislation introduced by Senate President Pro Tempore Kevin de Leon gave both retirement systems an out not to divest if they determined such divestments would be financially harmful.

CalPERS offered no analysis of the financial prospects of coal company securities in the future in the agenda material. But the prices of coal industry stocks have been in a tailspin the last several years, some companies have gone bankrupt, and the outlook for the industry, particularly in the U.S., is not positive, despite President Donald Trump's pro-coal stance.

The agenda material shows the CalPERS investment committee, which had not publicly taken a stand on the divestment law, made its decision to divest in closed session at its May investment committee meeting.

Staff and board members of the $331.6 billion California Public Employees' Retirement System, Sacramento, have said publicly that they generally oppose mandates from the Legislature requiring divestiture.

In the agenda material, CalPERS staff say they engaged with 17 coal companies, 14 of which offered no transformation plans away from coal, and three which said they were transforming to a cleaner energy model, the material said. CalPERS said its remained invested with the three companies, all which are located overseas. They are Exxaro Resources in South Africa, Banpu Public Co. in Thailand and PT Adaro Energy in Indonesia.

CalPERS spokeswoman Megan White said in an email that the 14 stocks the system divested had a total value of $14 million.

The dollar amount is relatively small compared to CalPERS' total stock portfolio of $181.3 billion.

The CalSTRS board voted to divest from U.S. thermal coal companies in February 2016 and non-U.S. companies in June of this year.