The $206.5 billion California Teachers’ Retirement System (CalSTRS) has decided to divest from all non-US thermal coal holdings, effective July 1. The move prohibits any future active non-US thermal coal investment, and comes just over a year after CalSTRS divested from its US thermal coal investments.
“The motives driving today’s decision to divest the fund from all non-US 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 Harry Keiley, chair of CalSTRS’ investment committee. “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 said the board’s action aligns with its 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 or more. CalSTRS said burning thermal coal creates such a risk, and is a major contributor of greenhouse gases that negatively impact the climate on a global scale.
Prior to the divestment decision, CalSTRS staff engaged with two of its global thermal coal holdings in India to review their operations and related research materials outlining the impacts of their coal use. CalSTRS concluded that it had exhausted all efforts within its control, beyond continued direct management and board engagement that could affect change had been exhausted.
“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 Yee, who is also a CalSTRS 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.”
The divestment of non-US thermal coal assets represents approximately $8.3 million in three companies: Indonesia-based PT Adaro Energy, Exxaro Resources Limited of South Africa; and Australia-based Whitehaven Coal Limited.
“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,” said Keiley. “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 well-being of the planet.”