Fossil fuel divestment bill runs out of gas again in California

A California bill that would have required CalPERS and CalSTRS to divest from fossil fuel companies is being shelved by the author, Majority Leader Lena A. Gonzalez, due to proposed committee amendments to the bill, according to a news release.

The amendments were put forward before a June 19 hear in the state assembly committee on public employment and retirement and would allow for continued investment by the $499.7 billion California Public Employees’ Retirement System, Sacramento, and $332.5 billion California State Teachers' Retirement System, West Sacramento, in fossil fuels.

This is the second time a fossil fuel divestment bill has been shelved. A similar state bill was put on hold by Sen. Gonzalez, a Democrat, last year after passing in the Senate in May 2023.

Due to the committee’s proposed amendments and refusal to negotiate, Gonzalez decided to shelve the bill and reintroduce it next year.

The bill would have prohibited CalPERS and CalSTRS from investing in the top 200 fossil fuel companies and would have required 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.

“CalPERS remains committed to its sustainable investment plan, which will reduce the carbon intensity in our portfolio, while investing $100 billion in climate solutions,” CalPERS said in a written statement.

A committee analysis filed June 17 noted that California Gov. Gavin Newsom had earlier issued an executive order relating to the state’s “climate change goals,” which directed the state department of finance to create a “Climate Investment Framework” leveraging the state’s $700 billion investment portfolio. The framework includes a proactive investment strategy for the state’s pension funds that reflects climate-change risks.

“To the extent that CalPERS and CalSTRS is participating in the Climate Investment Framework this bill may be akin to ‘putting the cart before the horse,’ or deemed as unnecessary due to the work of the DOF,” the analysis said.

“CalPERS remains committed to its sustainable investment plan, which will reduce the carbon intensity in our portfolio, while investing $100 billion in climate solutions,” CalPERS said in a written statement.

One of the proposed amendments to the bill would have removed the provision requiring CalPERS and CalSTRS divest their holdings of a fossil fuel company on or before July 1, 2031, which the analysis said “is the equivalent of a fire sale.”

Both CalPERS and CalSTRS opposed the bill.