California Lawmakers Force Coal Divestments

The California Public Employees’ Retirement System (CalPERS) is to begin talks with thermal coal companies in its portfolio, in response to pressure from Californian politicians.

The move is the first step required by Senate Bill 185, which seeks to prohibit CalPERS and the California State Teachers’ Retirement System (CalSTRS) from investing in thermal coal companies.

“We remain committed to encouraging our investment managers, portfolio companies, and policy makers to engage in responsible environmental practices.” —Anne Stausboll, CalPERSThe bill was introduced by Kevin de León, California’s senate president, and signed this week by Governor Jerry Brown.

Senator de León called for the two giant pension funds—which have roughly $477 billion in assets between them—to divest from coal companies last year, but CalPERS initially pushed back, citing a preference for engaging with companies first before divesting.

For more stories like this, sign up for the CIO Alert newsletter. 

CalPERS now intends to meet with the coal companies it owns to ascertain the risks posed to these holdings by a changing climate. In a statement on its website CalPERS confirmed that, following talks with the 27 thermal companies in which it has stakes, it will “evaluate divestment” from the holdings in line with the senate bill.

CalPERS CEO Anne Stausboll said her fund had “a long history of constructively engaging companies to advance sustainable business practices.”

“We applaud Senator de León and Governor Brown for their commitment and attention to this important issue,” Stausboll added. “CalPERS has been at the forefront of tackling climate change issues through policy advocacy, engagement with portfolio companies, and investing in climate change solutions. We remain committed to encouraging our investment managers, portfolio companies, and policy makers to engage in responsible environmental practices as part of our duty as a principled and effective investor.”

CalPERS’ stakes in thermal coal companies are worth an aggregate $57 million, the pension said. Thermal coal is predominantly used in power generation, and according to Senate Bill 185 it is the largest contributor to climate change in the US.

CalSTRS, meanwhile, has yet to formally respond to the newly signed bill. However, in a response to a previous draft published in June, the pension stated that it had already begun a policy of “due diligence, engagement, and possible divestment with respect to the investments affected by the bill”.

Karsten Kallevig, CIO, real estate, NBIMNorway’s sovereign wealth fund has opened an office in Tokyo as it continues to expand its real estate portfolio.

The three-person office was opened in the Japanese capital yesterday (October 8) by the $850 billion Norway Government Pension Fund—Global. It is the fund’s third office in Asia, after Singapore and Shanghai, China.

Karsten Kallevig, CIO for real estate at Norges Bank Investment Management, which runs the fund, said the fund had selected Tokyo and Singapore as the two main locations for its expansion in Asia. “Tokyo is a market that fits well with the rest of our portfolio,” he added.

Kallevig was appointed to his role in 2011 to invest up to 5% of the portfolio in direct property deals. His team have already purchased major commercial property assets in cities including New York, London, San Francisco, Washington, Munich, and Paris.

Never miss a story — sign up for CIO newsletters to stay up-to-date on the latest institutional investment industry news. 

“We’ll be focusing on office buildings in selected central areas of the city,” Kallevig said. “Having a separate real estate office in Tokyo will give us that important local presence and help us build the best possible property portfolio in this market.”

The Government Pension Fund—Global already has substantial investments in Asian equities and fixed income, but the new location will be the first time it has ventured into the continent’s property market.

Subscribe to a free PW Newsletter!