California forces pensions funds to divest from coal, but Future Fund digs in

California has passed a new bill that requires its main public pension funds to divest coal stocks within 18 months – but Australia’s main public super fund says it has no intention of following suit.

In California, a 43-27 vote on the bill known as SB185 was enough to ensure the state’s largest public pension funds CalPERS and CalSTRS – with some $US480 billion in funds between them – will have to completely divest from thermal coal within 18 months.

The case for fossil fuel divestment became a lot stronger after a new report from Trillium Asset Management found that CalSTRS and CalPERS lost over US$2.1 billion and US$3 billion respectively last year.

CEO of Trillium Asset Management Matthew Patsky said in a statement: “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.”

CalPERS and CalSTRS combined hold over $US480 billion in assets, including stock in about 30 coal companies with a combined value of just over $US200 million.

“Coal is the fuel of the past and it’s no longer a wise investment for our pensioners,” said assemblyman Rob Bonta, who presented the bill before the assembly, in a statement, The Guardian reported. “I’m pleased that my colleagues agree: it’s time to move on from this dirty energy source.”

In a separate statement, CalSTRS said “Any effort to remove thermal coal from the portfolio must first meet the board’s standard of fiduciary care, CalSTRS’ first priority is, and always has been, safeguarding the financial futures of our members and their families, and to make decisions solely in the interest of our members and their beneficiaries.”

Its hard to imagine getting a similar government directive in Australia, even though some funds – particularly university endowment funds – are moving away from fossil fuels on the urging of their students.

However, Peter Costello, the former Howard government treasurer and now chairman of the $117 billion Future Fund, says he has no intention of divesting from fossil fuels, saying that coal will form a critical part of Australia’s energy mix for the foreseeable future.

“Unless parliament passes a law so that we are in breach of statute, we’ll continue to invest in companies where there is an investment case, whether they are banks or fossil fuel companies or banks lending to fossil fuel companies,” Costello told the AFR.

Meanwhile, Thea Ormerod, President of the multi-faith Australian Religious Response to Climate Change, says world leaders have a moral duty to stop digging up coal.

“Pope Francis in his encyclical, and Muslim leaders at the Islamic Climate Summit in Istanbul, are recent examples of how religious leaders have been speaking out about the great global challenge of climate change,” she said.

“The future for our children and theirs, and especially for the world’s most vulnerable such as in the low lying islands of Kiribati, ultimately depends on real action being taken now,” she said. “Meaningful action on climate is plainly incompatible with the continued expansion and opening up of coal reserves.”

Kiribati President Anote Tong earlier this month called on world leaders to support a global moratorium on new coal mines and coal mine expansions.