A California bill that would require CalPERS and CalSTRS to divest from fossil fuel companies passed the state Senate on Thursday.
Both the $456.5 billion California Public Employees' Retirement System, Sacramento, and $311.1 billion California State Teachers' Retirement System, West Sacramento, oppose the bill.
Specifically, the fossil fuel divestment bill would prohibit CalPERS and CalSTRS from investing in the top 200 fossil fuel companies, and would require the two pension funds to divest any current holdings in these companies by 2031, with an additional five-year extension should the pension funds encounter certain specified market conditions.
According to a presentation to the CalPERS board in March, the pension fund has $9.4 billion invested in fossil fuel companies that would have to be divested should the bill become law.
California's fossil fuel divestment bill " would do nothing to combat the dangers of climate change," said Marcie Frost, CalPERS CEO, in an email. "Its only impact, at least in the short term, would be to make it that much harder to achieve the investment returns needed to pay the benefits promised to CalPERS members."
CalSTRS' board voted to oppose the bill under its policy to oppose legislation that restricts or infringes on its authority to administer the retirement plans and on its investment authority, spokeswoman Mindy Tirapelle said in an email.
However, in 2021 CalSTRS pledged to achieve net zero by 2050 or sooner in recognition that climate change affects the economy and CalSTRS' entire investment portfolio, she added.
"Divestment ignores the larger climate risks from different sectors that CalSTRS is working to address, and it would divert resources away from CalSTRS' efforts to achieve net zero," Ms. Tirapelle said.
CalSTRS' board voted to support another bill in the package that requires certain companies operating in California to annually report its climate-related financial risks, she said. The board did not take a position on the third bill in the package, which would require some companies operating in California to report and verify statewide greenhouse gas emissions, Ms. Tirapelle said.
