Bill To Force CalPERS, CalSTRS Divestment from Fossil Fuel Investments Moves To Senate

A bill to phase out fossil fuel investments in the California Public Employees’ Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS) state public pension funds was passed in the Senate Appropriations Committee Thursday, with the bill next going to a complete Senate vote in the next few weeks.

Senate Bill 252 by Senator Lena Gonzalez (D-Long Beach), would specifically prohibit the boards of CalPERS and CalSTRS from making new investments or renewing existing investments of public employee retirement funds in fossil fuel companies. Complete divestment from the companies are due by 2030, with an additional five years being given on top of that in case market conditions aren’t favorable for a divestment for a time. Both boards are also required to file a report with the legislature and the Governor beginning in 2025 on which companies they have divested from in the past year.

Authored by Senator Gonzalez due to CalPERS and CalSTRS continuing to invest in fossil fuel companies despite California’s continuing legislative actions regulating moving away from fossil fuels under the mantra of combatting climate change, Gonzalez and bill supporters hope that SB 252 will help California achieve zero carbon and green energy goals by taking away billions in investments to fossil fuel companies.

In total, up to $14.8 billion can be deinvested from both pension funds. CalPERS, which currently has an investing power of $469 billion, is investing $9.4 billion in fossil fuel companies. Meanwhile CalSTRS, worth $327 billion, currently has $5.4 invested in those companies. Both funds have continued investing in the companies in recent years, having a combined $1.3 billion in Exxon alone, as well as $817 million in Chevron.

“Californians, along with states and nations around the globe, are facing the real and immediate threats of climate change and its ever-growing impacts on our health, safety, environment, and our ability to pass on a livable planet to future generations,” said Gonzalez in March. “California has been a world leader in taking steps to combat the causes of climate change, setting historic carbon reduction goals, and taking meaningful actions to help prevent environmental destruction and protect communities who bear the overwhelming brunt of carbon emissions. Despite these forward-thinking actions, California’s multibillion dollar retirement pension funds are actively investing billions of dollars in the very fossil fuel companies that are the primary cause of climate change.”

SB 252 continues through Legislature

Despite the previous version of the bill, SB 1173 dying in the Legislature last year, SB 252 has continued to grow support this session. Last month, it passed the Senate Labor, Public Employment and Retirement Committee by a vote of 4-1 and the Judiciary Committee 8-2. After being placed in the suspense file for several weeks, SB 252 came to a vote Thursday in the Appropriations Committee, passing there as well, and bringing the vote to the full Senate.

Supporters praised the renewed support for the bill on Thursday.

“Californians are living through record fires and floods, and are rising up to demand our public pension funds stop bankrolling climate chaos,” Fossil Free California Coordinating Director Miriam Eide said in a statement on Thursday. “Investments have better returns when their fund structure accounts for environmental and social factors and risks, especially the impact on workers and communities. CalPERS and CalSTRS should not be hiding risks to our  from the public– including how the companies they invest in treat workers and pollute the environment. Continuing to allow toxic and volatile fossil fuel investments to linger translates to riskier outcomes for our retirees, and that endangers the financial security of us all. Divestment is the only viable way forward – with divestment, it’s not if, it’s when. And for California, with SB 252’s incredible momentum, the time is now. We’re ready and excited to see this move to the Senate floor.”

However, those opposing the bill were also in high spirits  Thursday, with many noting that this had largely happened with similar bills in the past, only to be shut down later.

“All it is going to take is several energy companies being threatened with disinvestment to show how they are rapidly becoming more green,” said economist and energy sector researcher Paul Charlemagne in a Globe interview. “You turn down them, you hurt green energy, as some are even the main holders of important green technology. There is already considerable opposition to the bill, and once these issues are brought up and people aren’t blindly supporting the bill, we’ll see this die out once again.”

“Plus, even if this does pass, these companies can easily get investors to get on board to fill in that gap. There is no scenario here in which these companies will be hurt long term. The better option would be to work with them and get them to go green faster and work on technology to help fill California’s energy gap.”

SB 252 is expected to be heard in the Senate soon.