CalPERS, CalSTRS lose $5 billion on fossil fuels

Coal plant

Black skies and red ink: fossil fuels are bad for the climate and
bad for your portfolio.

Over the last fiscal year, CalPERS and CalSTRS held on to their investments in coal, oil, and gas. They now know that was a big mistake. Clinging to the myth of Old Energy’s profitability and the chimera of shareholder engagement, the two big California state pension funds squandered over $5 billion in pension assets.

350.org today released a report from Trillium Asset Management that included this disturbing information. Trillium, a Boston-based independent investment advisor, estimates that CalPERS lost $3 billion in equity assets of the world’s 200 largest coal, oil, and gas companies over the last fiscal year ending June 30—including $540 million in coal losses alone. CalSTRS lost over $2 billion—of which $330 million was in coal stocks.

Matthew Patsky, CEO of Trillium, commented on the financial risk:

This is a material loss of money, which directly impacts the strength of the pension fund. Fossil fuel stocks are volatile investments. Investors and fiduciaries should take this moment to reassess their financial involvement in carbon pollution, climate disruption and the financial risk fossil fuels plays in their portfolio.

Divestment in 2014 would have been the financially astute move, as Brett Fleishman, senior analyst with 350.org, pointed out: “It’s important to see that fossil fuels in general, and coal in particular, are risky bets for the pension system. When folks are saying divestment is risky, we can say, ‘Well, not divesting is risky.'”

In fact, divestment remains the financially astute move today, and there is legislation now before the California State Assembly that would begin that process. Senate Bill 185, which requires CalPERS and CalSTRS to divest from coal companies, passed the State Senate in June and will come up for a floor vote in the Assembly later this month. You can let your Assembly Member know of the importance of fossil fuel divestment by signing our petition.

Senator Jerry Hill of San Mateo, who co-authored SB 185, said:

This bill is the right thing to do from both the economic and social perspective. We should be moving to sources of energy, and investments, that are socially responsible and will take us from the 20th century and into the 21st.

This campaign is urgent: $5 billion pays for a lot of pensions. You can follow the progress of SB 185 on our campaign page.

Divestment. Morally, it’s the right thing to do. Financially, it’s the smart thing to do.

Update, 8/14: CalSTRS spokesman Ricardo Duran told the Sacramento Business Journal that the fund is in the process of evaluating its coal holdings to “see if a divestment is possible at this point.”

 

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