BILL NUMBER: SB 185 CHAPTERED
BILL TEXT
CHAPTER 605
FILED WITH SECRETARY OF STATE OCTOBER 8, 2015
APPROVED BY GOVERNOR OCTOBER 8, 2015
PASSED THE SENATE JUNE 3, 2015
PASSED THE ASSEMBLY SEPTEMBER 2, 2015
AMENDED IN SENATE JUNE 2, 2015
AMENDED IN SENATE APRIL 8, 2015
AMENDED IN SENATE MARCH 25, 2015
INTRODUCED BY Senator De León
(Coauthor: Senator Hill)
FEBRUARY 9, 2015
An act to 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, De León. Public retirement systems: public divestiture of
thermal coal companies.
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 prohibit the boards of the Public Employees'
Retirement System and the State Teachers' Retirement System from
making new investments or renewing existing investments of public
employee retirement funds in a thermal coal company, as defined. This
bill would require the boards to liquidate investments 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 provide that it does
not require a board to take any action unless the board determines
in good faith that the action is consistent with 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, 2018, these
boards to file a report to the Legislature and the Governor,
containing specified information, including a list of companies of
which 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.
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 section 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 (f) 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) Nothing in this section 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 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, 7513.7, and 7513.75.