CalSTRS Takes Action to Divest of All Non-U.S. Thermal Coal Holdings
Action follows prior divestment of U.S. thermal coal holdings
WEST SACRAMENTO, Calif. – The Teachers’ Retirement Board today announced the decision to divest the fund of all non-U.S. thermal coal holdings, effective July 1, 2017.
The board’s action aligns with CalSTRS’ long-term global perspective and its fiduciary duty, including consideration of environmental risks – both current and those projected over the next 10 to 25+ years. Burning thermal coal as a means of energy production creates such a risk, as a major contributor of greenhouse gases that negatively impact the climate on a global scale.
“The motives driving today’s decision to divest the fund from all non-U.S. thermal coal, while reflecting the portfolio risks, is also a statement from the board to the global marketplace that we will not tolerate the deleterious effects of climate change, regardless of the recent actions taken by the federal government.”
Investment Committee Chair
“The motives driving today’s decision to divest the fund from all non-U.S. thermal coal, while reflecting the portfolio risks, is also a statement from the board to the global marketplace that we will not tolerate the deleterious effects of climate change, regardless of the recent actions taken by the federal government,” said Investment Committee Chair Harry Keiley. “In just the past year, we have consistently reinforced our unwavering commitment to the Paris Climate Accord and our belief that climate risk is a drag on our portfolio’s long-term performance.”
CalSTRS Divestment Policy requires extensive engagement, which could include shareholder resolutions and media campaigns in order to elicit change, prior to the board taking action to divest of a particular investment. As such, staff engaged with two of CalSTRS’ global thermal coal holdings in India to conduct a thorough review of their operations and related research materials outlining the impacts of their coal use. Based on this assessment and ongoing shareholder efforts, staff concluded that all efforts within CalSTRS’ control, beyond continued direct management and board engagement, that could effect change have been thoroughly exhausted.
Today’s action completes a two-part divestment process set in motion by the October 2015 passage of Senate Bill 185 calling for the public divestiture from thermal coal companies. In February 2016, the Teachers’ Retirement Board voted to divest the fund of all U.S. thermal coal holdings, which was complete by May 9, 2016. The financial impact of that action was less than $1.5 million.
“As fiduciaries working to maximize the retirement benefits that educators have earned during their careers, we know it is clear that the liability of any investment in thermal coal is too great.”
Betty T. Yee
California State Controller
“As fiduciaries working to maximize the retirement benefits that educators have earned during their careers, we know it is clear that the liability of any investment in thermal coal is too great,” said California State Controller Betty T. Yee, a Teachers’ Retirement Board member. “The regulatory risk and environment impacts climate change places on the fund far outweighs the ability of thermal coal companies to continue to create long-term value.”
“Coal is the fuel of America’s past. At a time when clean-energy jobs far outpace those of the dying coal industry, why should we continue to invest in a product that pollutes the air, sickens our children and contributes to global warming,” said California State Treasurer John Chiang, who is also a Teachers’ Retirement Board member. “CalSTRS did what was right for California’s taxpayers, for our members and for the planet.”
The non-U.S. thermal coal divestment action taken today represents approximately $8.3 million in three companies: PT Adaro Energy, based in Indonesia; Exxaro Resources Limited of South Africa; and the Australian company, Whitehaven Coal Limited. The decision will also prohibit any future active non-U.S. thermal coal investment.
“As a powerful institutional investor, CalSTRS pledges to do our part to reduce climate change impacts by exercising our influence through a variety of channels,” Mr. Keiley continued. “Environmental risks inherent in burning thermal coal for energy production represent a material impact and threat, not only to the fund, but also to the wellbeing of the planet. CalSTRS will continue to engage to spearhead environmental risk mitigation strategies by holding portfolio companies accountable for their actions and propelling them forward in a positive direction.”
The California State Teachers’ Retirement System, with a portfolio valued at $206.5 billion as of April 30, 2017, is the largest educator-only pension fund in the world. CalSTRS administers a hybrid retirement system, consisting of traditional defined benefit, cash balance and voluntary defined contribution plans. CalSTRS also provides disability and survivor benefits. CalSTRS serves California’s more than 914,000 public school educators and their families from the state’s 1,700 school districts, county offices of education and community college districts.
See how CalSTRS demonstrates its strong commitment to long-term corporate sustainability principles in its annual Global Reporting Initiative sustainability report: Global Stewardship at Work.