The State of California is again leading the nation, and this time the Golden State is in the vanguard of the thermal coal divestment movement. Of note, the California legislature recently passed a law requiring the California Public Employees’ Retirement System (CalPERS) to divest from all thermal coal related investments and avoid them in the future.

Related to this, CalPERS has agreed this week that it will begin discussions with thermal coal companies in its portfolio regarding plans to divest.

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More on California pension funds divesting from coal

The legislature actually tried to get the huge pension funds to divest from coal last year, but CalPERS pushed back, saying engaging with companies first before divesting was a better policy.

Given the new law, however, CalPERS is planning to meet with the coal companies in its portfolio to dtermine the risks posed to these holdings related to climate.  CalPERS released a statement saying that after talks with the 27 thermal coal companies in which it has stakes, it will “evaluate divestment” from the holdings in line with the law.

CalPERS CEO Anne Stausboll commented that the 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 continued. “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.”

Apparently, CalPERS’ stakes in thermal coal companies are currently valued at around $57 million. Thermal coal is almost exclusively used in power generation today, and is generally considered the largest contributor to climate change in the U.S.

CalSTRS has yet to formally respond to the newly-signed law. In a response to a draft of the bill published this summer, however, the fund noted that it had already taken the initial steps toward “due diligence, engagement, and possible divestment with respect to the investments affected by the bill”.