Not So Profitable: Who Lost Over $5 Billion On Fossil Fuels?

Fossil fuels are not always profitable. Take the California Public Employees' Retirement System (CalPERS) and the California State Teachers’ Retirement System (CalSTRS), the Golden State’s largest public pension funds, for example. They have lost over $5 billion on fossil fuel investments during the past fiscal year, according to a report by Trillium Asset Management.

Let’s first look at the coal investments. The two pension funds lost a combined $840 million from stock investments in the world’s largest coal companies during the fiscal year that ended June 30. That’s a lot of public investment to lose on a very dirty fuel. Trillium’s analysis indicates that BHP Bilton demonstrated the biggest dollar decreases at both pension funds.

When Trillium expanded the analysis to include the world’s 200 largest oil, gas and coal companies by carbon reserve, it came to the combined $5.1 billion estimated loss. That amounts to a 25 percent decrease in the pension funds’ coal stocks during the 12-month period. However, other stock investments by both pension funds increased.

"Fossil fuel stocks are volatile investments,” said Matthew Patsky, CEO of Trillium Asset Management. “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.”

Senate bill would direct CalPERS and CalSTRS to divest from coal

There is a solution: divesting from fossil fuels. California State Senate president pro tem, Kevin de Leon, introduced a bill (SB 185) that would direct CalPERS and CalSTRS to divest from companies that have at least half of their revenue coming from coal mining for power plants. The bill would direct that both pension funds divest their investment portfolios of coal companies.

“These freshly incurred losses starkly demonstrate coal’s financial risk, and illustrate the potential benefits of SB 185 to California pensioners,” said Will Lana, partner at Trillium Asset Management.

 

By Jan. 1, 2017,  both boards of CalPERS and CalSTRS would be required to file a report with the state legislature and the governor. The report would cover actions the pension funds have taken to divest from coal and recommendations to ensure the board is acting consistently with its fiduciary responsibilities. In addition, it would include a comprehensive assessment of the feasibility of divesting other fossil fuel investment funds such as natural gas and petroleum.

There are several reasons why the bill’s authors want the pension funds to divest from coal:

1. Coal combustion to generate energy is the leading cause of the greenhouse gas pollution that causes climate change to occur. Utility coal plants in the U.S. emitted 1.7 billion tons of carbon dioxide in 2011. A typical coal plant emits 3.5 million tons of carbon a year. 


2. California gets very little of its power from coal. Coal accounts for about 8 percent of the state’s energy sources. The majority of the 8-percent figure comes from coal power imported from other states for Southern California municipal utilities.

“This bill is the right thing to do from both the economic and social perspective,” bill co-author, State Sen. Jerry Hill (D-San Mateo) told the San Francisco Chronicle. “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.”

Yes, indeed, divesting from coal is the right thing to do for both the planet and the public pension funds. Just say no to dirty coal

Image credit: Flickr/Kim Scarborough