June 24, 2015 / 6:10 PM / 2 years ago

UPDATE 4-California coal divestment bill clears assembly panel

3 Min Read

(Adds comments from Calpers, Peabody and investment manager Jodi Neuman, paragraphs 8-14)

By Rory Carroll

SAN FRANCISCO, June 24 (Reuters) - A bill to require California's state pension funds Calpers and CalSTRS to sell their investments in companies that generate at least half their revenue from coal mining passed an Assembly committee by a vote of 5-1 on Wednesday.

Pension funds are under pressure from environmental activists to halt investing in fossil fuels, and the vote could increase the momentum for other funds to sell such assets as this has become a hot-button issue both domestically and internationally.

Norway's parliament recently voted to reduce coal investments by its $880 billion sovereign wealth fund. Stanford University and the University of Maine have made similar moves.

Coal company shares added to their losses after Wednesday's vote and the bill now heads to the California Assembly Appropriations committee. If it passes, it will go to the Assembly floor, where supporters expect stiff opposition from Republicans and moderate Democrats.

The bill passed the California state Senate earlier this month.

Calpers said its thermal coal mining investments as defined under the bill are valued at $100-200 million. It has investments in coal companies including Peabody Energy and Arch Coal according to its latest investment report.

CalSTRS has holdings of around $40 million, according to spokesman Ricardo Duran. Both Calpers and CalSTRS said they did not have a position about the legislation.

Calpers spokesman Joe DeAnda said if Calpers was required to divest, funds would be reinvested according to its equity index.

Before the vote, bill author and California Senate President Pro Tem Kevin de Leon told the committee that coal is a bad investment because coal plants were closing in the United States and demand from the world's largest consumer, China, was reduced.

"The writing is on the wall. Our policies, our technologies, and global markets are moving in concert away from coal as an energy source," de Leon said.

Peabody spokesperson Vic Svec called the bill "wholly symbolic and political."

He cited a University of Chicago study, which found that diversification costs from divesting energy stocks would represent a 23 percent loss over 50 years.

Jodi Neuman, an investment manager working for Trillium Asset Management, which represents $2.2 billion, said passage of the bill would set a great example for other pension funds around the country.

The committee voted six days after the leader of the Catholic Church, Pope Francis, called for humanity to turn away from fossil fuels. (Reporting by Rory Carroll; Editing by Megan Davies, Grant McCool and David Gregorio)

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