CalPERS tiptoes into engagement with coal companies

At their first meeting since the Governor signed SB185 requiring CalPERS and CalSTRS to divest from coal stocks, the public pension fund’s Investment Committee heard a consultant report on 1) the prohibitive transaction costs of divestment, and 2) all CalPERS Investment Committee meeting at Sacramento Headquartersthe money the fund ($293 billion and counting) might have had the Board not instructed staff to divest from South Africa, tobacco, Iran, Sudan, and firearms. Questioned by board member Priya Mathur, the consultant admitted that the report was based solely on the numbers, and not on any external factors such as the potential cost (in any sense of the term) of the perpetuation of apartheid in South Africa.

Then the discussion turned to coal, and to the fund’s need to begin to engage the 24 coal companies in the portfolio that derive more than 50 percent of their revenue from coal extraction; along with the coal sector’s dismal performance in terms of stock value over the past several years. (One might ask why CalPERS was not already engaging with these companies, or with the 85 coal companies they “own” that get less than half of their revenue from mining.) Staff’s recommendation is that engagement with coal companies not begin until after the COP21 climate talks in Paris in December. Perhaps the conference will soften the companies up for effective engagement.

One might also ask (and this one did) just what the engagers will be asking the coal companies to do? How would a coal company have to change its business model in order for CalPERS to maintain its holdings after SB185? An answer may be forthcoming in January, if a board member thinks to ask the question.

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