Pension Crisis

Forced Coal Divestment Robs California Pension Fund of Revenue

Millions lost when political influence overrules financial acumen.


Coal Mine

Thank political ideology for California's public employee pensions missing out on a chance to improve stock performances and make up for part of a huge problem with the chronic underfunding that puts taxpayers on the hook for billions in liabilities.

In 2015, lawmakers passed a bill subsequently signed by Gov. Jerry Brown forcing the California Public Employees' Retirement System (CalPERS) to divest all of its coal investments by July 2017. And they have, for the most part.

The decision was pushed by Democratic environment-minded lawmakers wanting to "take a stand" against fossil fuel companies and against climate change, as the Sacramento Bee notes. While the move was clearly political, there wasn't much outrage because at the time it wasn't really a bad business decision. Coal companies were not performing well and CalPERS' own investment report for last year determined that their coal investments were worth less than half what they paid for them.

The performance of the coal industry, however, was also political, burdened as it was by executive orders for heavy regulation put into place by President Barack Obama.

Then President Donald Trump happened. Trump has stripped away some of those executive orders, causing a resurgence in the fortunes of several of those companies. As a result, stocks are bouncing back in value. Had CalPERS hung onto them for a few more months at least, they'd have recouped more of their losses. Shares for one company alone are worth 15 times more than they were just a year ago:

CalPERS in its report said it divested shares from 14 coal companies that were worth $14.7 million when the pension fund sold them. Stocks for 13 of the 14 companies are worth more than they were a year ago when the pension fund was divesting from the industry.

The entire portfolio is worth more than $300 billion, and if this were an isolated incident it would be small potatoes and easier to forgive. But it's not. Lawmakers frequently attempt to use CalPERS investments to make political statements of opposition. The Bee notes this year lawmakers have tried to force the pension fund to divest from companies in Turkey, from companies that help build the Dakota Pipeline, and even companies that would work on Trump's supposed border wall.

In 2013 CalPERS sold off its investments in gun companies and has made many other divestment choices entirely based on what lawmakers and the politically influential see as socially responsible without any sort of consideration of the financial consequences.

If it were a private retirement fund, who would object? There are many funds out there folks invest in that revolve around trying to make socially responsible investments and still hammer out positive returns.

But this is a public employee pension fund, and returns are guaranteed. California taxpayers end up paying the difference when divestment leads to financial loss. Lawmakers and political activists risk the citizens' money in order to make statements like this. And California cities have suffered tremendously due to growing pension obligations, having to cut back on services, lay off employees and even file for bankruptcy.

To its credit, CalPERS warns against these sorts of divestments, with good reason. It is not actually "responsible" to threaten the financial stability of the pension fund to make a political statement. But, as with every other poor financial decision by lawmakers, they know they aren't the ones who have to deal with the consequences.

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  1. Millions lost when political influence overrules financial acumen

    Who would’ve thought that such a thing was even possible?

  2. Can America divest itself from California? Asking for a couple hundred million friends.

  3. Look, it’s more important that smug douche-bag pols be able to pat themselves on the back for being so “woke” than to look out for future taxpayers. It’s like you people don’t even know how to prog. /sarc

    1. It’s not just future taxpayers, it’s current public employees who are going to get a severe haircut on their promised benefits when they try to collect and California heads to bankruptcy court. Funny how SEIU will strike over a lot of things, but not when it comes to making sure the pension promises are funded.

      1. California won’t be heading to bankruptcy court, they’ll get bailed out by the federal government and then the rest of us get to pay for their retardation. I really, really hope they are actually stupid enough to secede.

  4. It good for Californians to put their money where their mouth is.

    They should invest in Tesla and eschew Peabody Coal … even if Teslas are recharged by burning Peabody’s coal.

    1. Given the way they make the other manufacturers subsidize Musk’s company, they already are investing in Tesla. Throw in the charging stations built by the State and the “investment” amount is even larger.

    2. We’re all invested in Tesla.

  5. Lawmakers frequently attempt to use CalPERS investments to make political statements of opposition.

    They just want to flaunt their fascist bona fides.

  6. When you’re stupid enough to support a putz like Moonbeam, you may as well just go ahead and set your money on fire.

  7. When ever the state divest form a fund is always a good time pick up that investment. their loss my gain.

  8. Am I wrong to think that a private sector pension fund manager who did this (barring ones that advertise themselves as having an ideologically motivated investment strategy) might be criminally liable for financial malpractice?

    1. They’re supposed to be a fiduciary! Not activists!

      1. The so-called “socially responsible” private fund managers do the same thing: no defense, no fossil fuels, no tobacco, no alcohol, no firearms, etc. I don’t know whether there’s a BDS fund, but if it’s legal there probably is.

        Californian voters have decided to elect a governor and a legislature that opposes fossil fuels. Californian government is putting Calpers money where the voters’ mouths are. Californian voters know what they want, and the deserve to get it good and hard.

  9. Hahahahahahahahahahaha…ha.

    That is all I have to say about that.

  10. CalPers lost big when they sold off tobacco stocks decades ago. I’m not clear how selling coal holdings is “taking a stand” against coal companies. The company is not affected by who owns its stock.

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