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Green and Mean
CalPERS Could Scuttle Coal

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.

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  • FriendlyGoat

    There is no particular reason for TAI to believe that $45,900,000 out of $294,000,000,000 somehow cannot be invested as well for pension beneficiaries in any number of other sectors besides coal. There is no reason to believe, for instance, that the coal shares will outperform other industries where the money could be invested.

    Yes, divestiture by Calpers is mostly symbolic. But, arguing that it will hurt beneficiaries is essentially a claim by TAI that it has a crystal ball to predict the performance of coal shares in relation to everything else in the market. Silly.

  • LarryD

    “Socially Responsible Investing” has been around for decades, how’s its track record?

    Now that Calpers has started down that path, how often are they going to be able to resist demands for future dis-investments? And there is the flip side, investing in “fashionable” projects, like those renewable companies who have ended going belly-up.

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