LONDON, September 3 – A bill requiring California’s massive state pension funds CalPERS and CalSTRS to divest from thermal coal passed the State Assembly on Wednesday. If written into law they would become the first statewide pension funds in the U.S. to divest from fossil fuels.

The bill, passed by a vote of 43 to 27, requires two of America’s biggest public employee pension plans that manage $476 billion in assets to sell holdings in companies that generate at least half of their revenue from coal mining by July 2017. The bill (S.B 185), which passed the state Senate in June, now heads to California Governor Jerry Brown who is expected to sign it into law.

Mark Campanale, founder and executive director of the Carbon Tracker Initiative, said:

“Whilst at first blush the decision to vote through a coal divestment policy might look purely like a political act it has to be understood in the wider, financial context. At a time when the energy sector is going through a rapid transition to low carbon sources, it makes no sense to hold coal, which is rapidly becoming a dying industry. 

“ In fact, California has set some ambitious but achievable goals for clean energy and for its car fleet to halve its gas use by 2030. All legislators are doing is aligning their investment policies with their energy policies. Of course, it also makes sense that at a time when California is under very high water stress from drought that it isn’t helping to sustain an industry, coal, which when burnt releases the gases that contribute to climate change.

 “California is setting the lead where many other forward thinking pension schemes will be set to follow. As one of the largest economies in the world, as measured by GDP, its pension funds are a financial force to think about; where they may start with coal, they could easily include other fossil fuels particularly oil, the business case for which is looking increasingly shaky as other competing technologies, led by California’s Silicon Valley, lead the way in cleaning the energy and transportation systems.”

Anthony Hobley, CEO of the Carbon Tracker initiative, said:

“It is no surprise it has come to this. The coal industry has failed to engage or even mention the climate challenge, preferring instead to spend money on denying the problem rather than play a meaningful role in the solution. This is a harbinger of what could befall the oil and gas industry. 

“Recent statements on tackling climate change by the mainly European oil and gas companies is encouraging but difficult to square with actions on the ground, such as drilling in the arctic. 

“Unless they are followed by commitments to real and quantifiable actions to build a climate secure global energy system and transition their BAU business models will simply be seen as another cynical attempt to delay real action. Carbon tracker will be laying out a blueprint for just such a transition that investors can use to hold these companies to account.

The California Public Employees’ Retirement System (CalPERS) invests in about 20 to 30 thermal coal companies valued at approximately $100 to $200 million, including Peabody Energy and Arch Coal, according to media reports. The California State Teacher’s Retirement System (CalSTRS) has holdings of around $40 million. In a statement CalSTRS said that any effort to remove thermal coal from its portfolio must first meet the board’s standard of fiduciary care.

This vote comes shortly after a report from Trillium Asset Management revealed that, combined, CalPERS and CalSTRS incurred over $5 billion in losses from their holdings in fossil fuel companies in the last year alone.

The latest move is part of a rapidly growing worldwide divestment campaign spearheaded by 350.org to divest the financial holdings of universities, religious institutions, municipalities, pension funds, and other investors from fossil fuel companies to tackle climate change.

According to 350.org’s latest figures, 397 bodies have wholly or partially divested from fossil fuels to date including coal. Backers include organizations as diverse as Norway’s sovereign wealth fund, Stanford and Glasgow University and the Rockefeller Brothers Fund.