coal divestment | Pension360

CalPERS, CalSTRS to Step Up Climate Change Engagement Efforts

CalPERS and CalSTRS have issued a joint statement recounting their track records on engaging corporations on the topic of climate change. The statement also outlines future initiatives aimed at stepping up their corporate engagement on the sustainability front.

From the statement:

We recognize climate change as a material risk to society, the economy, and the impacts on our investment decisions. We have been at the forefront of tackling climate change issues through policy advocacy, engagement with portfolio companies and investing in climate change solutions.

CalSTRS and CalPERS both have well-established, thorough vetting processes for potential investments, which seek to test not only for financial potential, but for social, human and environmental impacts, as well.

CalSTRS developed an investment policy for mitigating environmental, social and governance risks under its CalSTRS 21 Risk Factors, adopted in 2008.

* Included in the 21 factors are points specific to environmental concerns such as air quality, water quality, climate change, and land protection.

* This policy guides the Teachers’ Retirement Board’s investment decisions.

* CalSTRS internal ‘Green Team,’ made up of representatives across all investment groups, further identifies ways to avoid or mitigate risks to the investment portfolio posed by environmental, social and governance factors.

CalPERS adopted Investment Beliefs addressing Climate Change issues:

* CalPERS believes long-term value creation requires effective management of three forms of capital: financial, physical and human.

* Investors must consider risk factors, for example climate change and natural resource availability that could have a material impact on portfolio returns

Read the full statement here.

The statement comes as the California legislature considers a measure that would force the pension funds to divest from all coal holdings. The funds have come out against the proposal.

Photo by Paul Falardeau via Flickr CC License

California Bill Would Force CalPERS, CalSTRS To Divest From Coal

California Senate President Kevin de Leon has introduced a bill that would force the state’s pension funds to exit all coal investments.

Additionally, CalSTRS and CalPERS would be prohibited from making new coal investments until 18 months after the bill becomes law.

De Leon hinted in November that he would introduce such a bill, and the pension funds had already responded negatively to the proposal.

More from the Guardian:

The California senate leader, Kevin de Leon, said he was introducing a bill on Tuesday calling on the two state funds – CalPERS, the public employees’ pension fund, and CalSTRS, the teachers’ pension funds, drop all coal holdings.

The bill is part of a larger package of climate measures – endorsed by Governor Jerry Brown – aimed at gearing up California’s efforts to fight climate change.

The former US vice-president and climate champion Al Gore spoke to the CalSTRS board in Sacramento last Friday. Gore has long argued that fossil fuels are a risky proposition as a long-term investment.

“Our state’s largest pension funds also need to keep their eyes on the future,” De Leon, a Democrat, said in an email. “With coal power in retreat, and the value of coal dropping, we should be moving our massive state portfolios to lower carbon investments and focus on the growing clean-energy economy.”

The two state funds are the biggest targets so far of a divestment movement that has moved from college campuses towards mainstream financial conversation.

[…]

De Leon’s proposal calls on managers of both state funds to withdraw from all coal companies, and make no new investments in coal within 18 months after the bill becomes law.

It further calls on the two funds to explore the feasibility of expanding its divestment, by divesting entirely from fossil fuels – including natural gas – and report back to the state legislature by 2017.

CalSTRS and CalPERS have a combined $299 million invested in coal assets, according to de Leon’s office.

Photo by Paul Falardeau via Flickr CC License

Norway’s Largest Pension Divests From Coal, But Sees Risks in Exiting Other Fossil Fuels

KLP, Norway’s largest pension asset manager, said it plans to divest from coal companies and increase investments in renewable energy.

The divestment from coal comes even as KLP remains heavily involved in oil and gas investments. That’s because an internal study suggested that divesting from all fossil fuel companies would pose big risks for KLP and harm future returns.

From IPE Real Estate:

It said it was doing this to contribute to the “urgently needed” switch from fossil fuel to renewable energy.

KLP defines coal companies as coal mining companies and coal-fired power companies that derive a large proportion of their revenues from coal.

At the very least, KLP will exclude those with 50% of revenues from coal-based business activities.

The names of the companies to be excluded will be published in an updated KLP list on 1 December.

KLP’s divestment from coal companies also applies to the KLP funds.

The public service pensions provider said preliminary estimates showed the divestment would lead to the sale of shares and bonds worth just under NOK500m.

[…]

The KLP Group, with total assets of NOK470bn, is already a major investor in renewable energy, with NOK19bn invested in Norway alone.

Last year, it also established a partnership with Norfund for direct investment in renewable energy and finance.

The additional NOK500m will be used for direct investments in increased renewable energy capacity in emerging economies, where KLP considers the need to be greatest.

The pension manager will not be divesting from oil and gas companies after a study suggested that doing so would diminish future returns. Details on the study from IPE Real Estate:

At present, the divestment does not apply to oil and gas companies.

KLP said this was because coal companies were considered to have the largest negative impact, both in terms of carbon emissions per unit of energy produced and local pollution in the vicinity of the coal-based facilities, even though there are significant variations between the different types of oil, gas and coal.

But KLP also said a withdrawal of investments in oil and gas companies would probably have a material impact on future returns, unlike the retreat from coal company stocks.

At the request of the Norwegian municipality of Eide, one of its customers, KLP carried out an assessment on the feasibility of pulling its investments out of oil, gas and coal companies without affecting future returns, in order to contribute to a better environment.

The report found no support for the “stranded assets” hypothesis, which posits that investments in companies with major fossil fuel reserves represent a greater financial risk than is normal for this type of undertaking.

It said: “On the contrary, a divestment from all fossil fuel companies would significantly increase KLP’s risk, particularly with respect to Norwegian shares.

“However, depending on the definition applied, divestment from coal companies alone would not represent any significant financial risk for KLP.”

KLP manages about $45 billion in pension assets.