Bill Text: CA SB185 | 2015-2016 | Regular Session | Amended

NOTE: There are more recent revisions of this legislation. Read Latest Draft

---

Bill Title: Public retirement systems: public divestiture of thermal coal companies.

Spectrum: Partisan Bill (Democrat 2-0)

Status: (Passed) 2015-10-08 - Chaptered by Secretary of State. Chapter 605, Statutes of 2015. [SB185 Detail]

Download: California-2015-SB185-Amended.html

---

BILL NUMBER: SB 185	AMENDED
	BILL TEXT

	AMENDED IN SENATE  MARCH 25, 2015

INTRODUCED BY   Senator De León

                        FEBRUARY 9, 2015

   An act to  add Article 5 (commencing with Section 7524) to
Chapter 21 of Division 7 of Title 1 of   amend Section
16642 of, and to add Section 7513.75 to,  the Government Code,
relating to public retirement systems.


	LEGISLATIVE COUNSEL'S DIGEST


   SB 185, as amended, De León. Public retirement systems: Public
Divestiture of Thermal Coal Companies Act.
   The California Constitution provides that the Legislature may by
statute prohibit retirement board investments if it is in the public
interest to do so, and providing that the prohibition satisfies
specified fiduciary standards.
   Existing law prohibits the Public Employees' Retirement System and
the State Teachers' Retirement System from investing public employee
retirement funds in a company with active business operations in
Sudan, as specified, and requires these retirement systems to
liquidate any investments in a company with business operations in
Sudan. Existing law also prohibits these retirement systems from
investing in a company that has specified investments in the energy
sector of Iran, as defined, including in a company that provides oil
or liquefied natural gas tankers, or products used to construct or
maintain pipelines used to transport oil or liquefied natural gas.
   This bill would  create the Public Divestiture of Thermal
Coal Companies Act and require   prohibit  the
boards of the Public Employees' Retirement System and the State
Teachers' Retirement System  to divest the  
from making new investments or renewing existing investments of 
public employee retirement funds  of any investments
 in a thermal coal company, as  defined, and
prohibit additional or new investments or the renewal of existing
investments in a thermal coal company   defined  .
This bill would  also  require the boards to
liquidate  the  investments  of the board in
a thermal coal company, as specified. This bill would require these
actions to be undertaken consistently with the board's fiduciary
responsibilities specified in the California Constitution. 
 in thermal coal companies on or before July 1, 2017, and would
require the boards, in making a determination to liquidate
investments, to constructively engage with thermal coal companies to
establish whether the companies are transitioning their business
models to adapt to clean energy generation. The bill would require
the boards, in consultation with the   Secretary of the
California Environmental Protection Agency, to make a comprehensive
assessment of the feasibility and implications of divesting the
retirement system funds of additional fossil fuel investments, such
as natural gas and petroleum. The bill would provide that it does not
require a board to take any action if the board determines and
adopts findings that the action would violate the board's fiduciary
responsibilities established in the constitution.  The bill
would make related legislative findings and declarations.
   This bill would require, on or before January 1,  2017,
  2018,  these boards to file a report to the
Legislature and the Governor, containing specified information,
including a list of  investments and  companies of
which  it has divested   they have liquidated
their investments. The bill would provide that board members and
other officers and employees shall be held harmless and be eligible
for indemnification in connection with actions taken pursuant to the
bill   's requirements, as specified  .
   Vote: majority. Appropriation: no. Fiscal committee: yes.
State-mandated local program: no.


THE PEOPLE OF THE STATE OF CALIFORNIA DO ENACT AS FOLLOWS:

   SECTION 1.    Section 7513.75 is added to the 
 Government Code  , to read:  
   7513.75.  (a) The Legislature finds and declares all of the
following:
   (1) The combustion of coal resources is the single largest
contributor to global climate change in the United States.
   (2) Climate change affects all parts of the California economy and
environment, and the Legislature has adopted numerous laws to
mitigate greenhouse gas emissions and to adapt to a changing climate.

   (3) The purpose of this article is to require the Public Employees'
Retirement System and the State Teachers' Retirement System,
consistent with, and not in violation of, their fiduciary
responsibilities, to divest their holding of thermal coal power as
one part of the state's broader efforts to decarbonize the California
economy and to transition to clean, pollution free energy resources.

   (b) As used in this section, the following definitions apply:
   (1) "Board" means the Board of Administration of the Public
Employees' Retirement System or the Teachers' Retirement Board of the
State Teachers' Retirement System, as applicable.
   (2) "Company" means a sole proprietorship, organization,
association, corporation, partnership, venture, or other entity, or
its subsidiary or affiliate, that exists for profit-making purposes
or to otherwise secure economic advantage.
   (3) "Investment" means the purchase, ownership, or control of
publicly issued stock, corporate bonds, or other debt instruments
issued by a company.
   (4) "Public employee retirement funds" means the Public Employees'
Retirement Fund described in Section 20062 of this code, and the
Teachers' Retirement Fund described in Section 22167 of the Education
Code.
   (5) "Thermal coal" means coal used to generate electricity, such
as that which is burned to create steam to run turbines. Thermal coal
does not mean metallurgical coal or coking coal used to produce
steel.
   (6) "Thermal coal company" means a publicly traded company that
generates 50 percent or more of its revenue from the mining of
thermal coal, as determined by the board.
   (c) The board shall not make additional or new investments or
renew existing investments of public employee retirement funds in a
thermal coal company.
   (d) The board shall liquidate investments in a thermal coal
company on or before July 1, 2017. In making a determination to
liquidate investments, the board shall constructively engage with a
thermal coal company to establish whether the company is
transitioning its business model to adapt to clean energy generation,
such as through a decrease in its reliance on thermal coal as a
revenue source.
   (e) On or before January 1, 2018, the board shall file a report
with the Legislature, in compliance with Section 9795, and the
Governor, which shall include the following:
   (1) A list of thermal coal companies of which the board has
liquidated its investments pursuant to subdivision (d).
   (2) A list of companies with which the board engaged pursuant to
subdivision (d) that the board established were transitioning to
clean energy generation, with supporting documentation to
substantiate the board's determination.
   (3) A list of thermal coal companies of which the board has not
liquidated its investments as a result of a determination made
pursuant to subdivision (g) that a sale or transfer of investments is
inconsistent with the fiduciary responsibilities of the board as
described in Section 17 of Article XVI of the California Constitution
and the board's findings adopted in support of that determination.
   (f) In consultation with the Secretary of the California
Environmental Protection Agency, the board shall make a comprehensive
assessment of the feasibility of divesting the public employee
retirement funds of additional fossil fuel investments, such as
natural gas and petroleum, and its implications for the funds. A
summary of this assessment shall be included in the report required
by subdivision (e).
   (g) This section does not require the board to take any action if
the board determines and adopts findings, in good faith and based on
publicly available information, that the action would violate the
board's fiduciary responsibilities described in Section 17 of Article
XVI of the California Constitution. 
   SEC. 2.    Section 16642 of the   Government
Code   is amended to read: 
   16642.  Present, future, and former board members of the Public
Employees' Retirement System or the State Teachers' Retirement
System, jointly and individually, state officers and employees,
research firms described in subdivision (d) of Section 7513.6, and
investment managers under contract with the Public Employees'
Retirement System or the State Teachers' Retirement System shall be
indemnified from the General Fund and held harmless by the State of
California from all claims, demands, suits, actions, damages,
judgments, costs, charges and expenses, including court costs and
attorney's fees, and against all liability, losses, and damages of
any nature whatsoever that these present, future, or former board
members, officers, employees, research firms as described in
subdivision (d) of Section 7513.6, or contract investment managers
shall or may at any time sustain by reason of any decision to
restrict, reduce, or eliminate investments pursuant to Sections
 7513.6 and 7513.7   7513.6, 7513.7, and 7513.75
 . 
  SECTION 1.    Article 5 (commencing with Section
7524) is added to Chapter 21 of Division 7 of Title 1 of the
Government Code, to read:

      Article 5.  Public Divestiture of Thermal Coal Companies Act


   7524.  This article may be known and cited as the Public
Divestiture of Thermal Coal Companies Act.
   7524.1.  The Legislature finds and declares all of the following:
   (a) The combustion of coal resources is the single largest
contributor to global climate change in the United States.
   (b) Climate change affects all parts of the California economy and
environment, and the Legislature has adopted numerous laws to
mitigate greenhouse gas emissions and to adapt to a changing climate.

   (c) The purpose of this article is to require the Public Employees'
Retirement System and the State Teachers' Retirement System,
consistent with, and not in violation of, their fiduciary
responsibilities, to divest their holding of thermal coal power as
one part of the state's broader efforts to decarbonize the California
economy and to transition to clean, pollution free energy resources.

   7524.2.  For purposes of this article, the following definitions
shall apply:
   (a) "Board" means the Board of Administration of the Public
Employees' Retirement System or the Teachers' Retirement Board of the
State Teachers' Retirement System, as applicable.
   (b) "Company" means a sole proprietorship, organization,
association, corporation, partnership, venture, or other entity, or
its subsidiary or affiliate that exists for profit making purposes or
to otherwise secure economic advantage.
   (c) "Investment" means the purchase, ownership, or control of
stock of a company, association, or corporation, corporate bonds or
other debt instruments issued by a company, or the commitment of
funds or other assets to a company, including a loan or extension of
credit to that company.
   (d) "Public employee retirement funds" means the Public Employees'
Retirement Fund described in Section 20062 of this code, and the
Teachers' Retirement Fund described in Section 22167 of the Education
Code.
   (e) "Thermal coal company" means a company engaged in the
combustion of coal as determined by the board using Bloomberg Global
Coal Index, Carbon Tracker, and Energy Transition Advisors Indices.
   7524.3.  Consistent with the board's fiduciary responsibilities as
described in Section 17 of Article XVI of the California
Constitution, and by the earliest feasible date after the enactment
of this article, the board shall undertake all of the following:
   (a) The board, shall divest the public employee retirement funds
of any investments in a thermal coal company.
   (b) The board shall not make additional or new investments or
renew existing investments in a thermal coal company.
   (c) The board shall liquidate the investments of the board in a
thermal coal company no later than eighteen months after this article
applies to that company.
   7524.4.  On or before January 1, 2017, the board shall file a
report with the Legislature, in compliance with Section 9795, and the
Governor on the following:
   (a) Actions it has taken to implement this article, including a
list of investments and companies of which it has divested.
   (b) Recommendations to ensure the board is able to act consistent
with its fiduciary responsibilities as described in Section 17 of
Article XVI of the California Constitution.
   (c) In consultation with the Secretary of the California
Environmental Protection Agency, a comprehensive assessment of the
feasibility of divesting the public employee retirement funds of
additional fossil fuel investments such as natural gas and petroleum
and its implications for the fund.
   7524.5.  Nothing in this article shall require a board to take
action as described in this section unless the board determines, in
good faith, that the action described in this section is consistent
with the fiduciary responsibilities of the board as described in
Section 17 of Article XVI of the California Constitution.