A new report from Trillium Asset Management finds that California’s two major public pension funds, the largest in the nation, lost a combined $5.1 billion on fossil fuel-related investments last year.
The California Public Employee’s Retirement System (CalPERS) posted a 28 percent decline on its oil and gas portfolio, while the California State Teachers’ Retirement System (CalSTRS) lost 27 percent on a similar set of investments for the fiscal year ending June 30th. Over the same period, most other stock investments held by the two pension funds rose.
The funds’ energy losses occurred in a year when energy holdings generally fell because of plunging oil prices.
Matthew Patsky, Trillium's chief executive, emphasized the impact of volatile prices.
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“This is a material loss of money, which directly impacts the strength of the pension fund,” he said. “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.”
The research indicates a 25 percent decline in the pensions’ coal stocks alone. CalPERS lossed an estimated $540 million from stock investments in the world’s largest coals companies, while CalSTRS lost #330 million from coal investments. Among the top 100 coal companies, BHP Billiton appears to have generated the largest dollar declines for both funds.
If a new state Assembly bill succeeds, CalPERS and CalSTRS may soon have to divest from coal. SB 185 would direct public retirement systems to divest from companies with at least half of their revenue from coal mining for power plants.
“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.
In the meantime, the funds are not indicating that their investment strategies will change. CalPERS spokesperson Joe Deandatold the LA Times: "We're a long-term investor and don't focus too much on any single year's performance. It won't change our long-term investment strategy."
CalSTRS spokesperson Robert Duran said the fund is “researching” its thermal coal holdings in light of SB 185.
Trillium’s research was undertaken on behalf of 350.org, a group backing the Assembly bill to divest. Fossil fuel divestment has recently been embraced as a symbolic act for climate change action by churches, universities, cities and even prominent investment groups; while in 2014, the number of fossil-free financial portfolios rose 50 percent from the previous year.