California’s legislators are mulling a move to divest the state’s major pension funds from coal. This follows several decisions by university endowments to make similar divestments, such as Stanford. Bloomberg reports:
Senate President Pro Tem Kevin de Leon, a Democrat from Los Angeles, said he will introduce legislation in January to order Calpers and the California State Teachers’ Retirement System, the second-largest U.S. pension, to begin to divest completely from coal.Calpers, with assets of $294 billion, had about $45.9 million in coal and consumable fuels holdings as of Sept. 30, according to data compiled by Bloomberg. Its largest holdings were in Consol Energy Inc. (CNX), $19.4 million; Peabody Energy Corp. (BTU), $7.2 million, and Alliance Resources Partners LP , $5.2 million, the data show.
We’ve said it before, but it’s worth repeating: divestment from coal makes no financial sense. It does not inflict any losses on the coal industry itself; it merely deprives the investor of a share of the industry’s profits. For those who support divestment, that’s probably a feature not a bug: If you weren’t acting with a total disregard for money, how would you know you were being virtuous?The problem with that is who will end up paying the price of that virtue: California’s massive public pension funds, which currently have impressive unfunded liabilities (CalPERS at $57.4 billion in 2013, CalSTRS at $70.5 billion). The wealth in these funds is owed to public servants who are counting on it for their retirement, not as a vehicle for expressing their liberal piety. Back when Massachusetts tried this, we said that it was possibly the worst pension idea we had ever seen. Now that we’ve seen it again? It still is.