SB 252—Public Retirement Systems, Fossil Fuels, Divestment
Senate Bill 252, by State Senator Lena Gonzalez (D-Long Beach), would prohibit the boards of CalPERS and CalSTRS, the nation’s two largest public pension funds, from investing in or renewing investments of public employee retirement funds in fossil fuel companies.
Up to $14.8 billion would be divested from both funds, which have continued investing in fossil fuel companies up to the present, including a combined $1.3 billion in Exxon alone, as well as $817 million in Chevron, according to Fossil Free California.
Views of Some Proponents of the Bill
Supporters of SB 252 are confident that divestment will help California achieve its zero-carbon and green energy goals. Gonzalez points out that we “are facing 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.”
“Research shows that portfolios that exclude fossil fuels have less risk with higher long-term returns,” says Clair Brown, professor of economics at the University of California, Berkeley. “Oil and gas companies already own fossil fuel reserves that will become stranded assets. … [R]removing risky fossil fuel stocks improves diversification and allows additional growth of the portfolio’s value.”
Fossil Free California’s Coordinating Director Miriam Eide writes, “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.” This risk is partly due to the increasing trend toward renewable energy and growing divestment of, and limitations on, fossil fuel development. To date, over 1,550 institutions representing more than $40 trillion in assets have committed to some level of fossil fuel divestment, according to Fossil Free California.
Views of Some Opponents of the Bill
Those against SB 252 maintain that energy companies are becoming greener and that development of green energy would be hurt if the companies are weakened, especially because “some are even the main holders of important green technology,” according to Paul Charlemagne in California Globe. “Plus … these companies can easily get investors … to fill in that gap. … 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.”
Finally, CalPERS Chief Executive Officer Marcie Frost points out that “divestment has little … impact on a company’s operations and therefore does nothing to reduce greenhouse gas emissions. Forcing CalPERS to sell fossil fuel companies’ stock does not change the amount of gasoline people use to drive to work, to pick up children from school, or to deliver food to the grocery store. The companies in question can easily replace CalPERS with new investors, ones who are unlikely to speak up as loudly or as consistently as we have about the urgent need to move toward a low-carbon economy.” Frost also argues that “divestment would [affect] our ability to produce the investment returns needed to fulfill our members’ retirement promises.”
—Kitty Kroger, Natural Resources Committee
