Senate Bill 1173 (Gonzalez) – Public retirement systems: fossil fuels: divestment – was scheduled to be heard in the Assembly Committee on Public Employment and Retirement on June 22, 2022, but its hearing was postponed. Having now failed its July 1, 2022, deadline to be voted out of policy committee, the bill is effectively dead for the year.
With certain exceptions, this bill would have prohibited CalPERS and CalSTRS from making additional or new investments or renewing existing investments of public employee retirement funds in a fossil fuel company. Moreover, the legislation would have forced the public pension funds to liquidate existing investments in fossil fuel companies on or before July 1, 2030.
CalPERS opposed SB 1173. In their analysis of the bill, CalPERS staff concluded that, as of December 31, 2021:
...the estimate of publicly traded securities held by CalPERS that meet the criteria of a ‘fossil fuel company’ as defined in SB 1173 is $7.4 billion. Should the CalPERS Board direct investment staff to divest these securities, the estimate of transaction costs (including commissions and market impact and excluding opportunity costs) to divest and reinvest the proceeds in other securities is between $75-$100 million.
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Every dollar in investment returns that is forgone, or expended on transaction costs and fees, must be offset by employer and employee contributions. If CalPERS were to divest from fossil fuel companies and the companies performed well, employers and employees would bear the investment loss and transaction costs to maintain divestment through increased contribution rates.
Consistent with its policy principles regarding legislatively mandated CalPERS divestments, CSDA led a coalition of local government and school associations in opposition to the SB 1173. The coalition’s most recent letter to the Assembly Committee on Public Employment and Retirement can be viewed here.
CSDA opposes any efforts that would divert CalPERS from its duty to its members, including divestment of CalPERS assets to achieve political objectives if the divestment would have a negative impact on the overall health of the fund. Alternatively, CSDA supports CalPERS proxy access efforts to affect change from within businesses CalPERS has invested in to ensure they are well managed for sustained, long-term success.
Stay tuned to CSDA eNews and Advocacy News for additional updates.
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