Climate bills on fossil fuel divestment, emissions disclosure make headway

California lawmakers advanced several climate bills intended to hold companies accountable for pollution contributing to atmospheric warming Tuesday, as opponents questioned whether the measures could make a tangible impact.

Proposals that would require corporations doing business in the state to divulge their carbon emissions and financial risk from climate change will progress. Another major bill to bar state pension funds from investing in fossil fuel firms passed two key committees.

Supporters of SB 252 say investment of public dollars in companies expanding their fossil fuel footprint undermines the state’s efforts to reduce California greenhouse gas emissions to 80% below 1990 levels by 2050.

“I don’t see how we decarbonize without a bill such as this one, and if we don’t have the advocates pushing as much as they are,” said bill author Sen. Lena Gonzalez in a Senate Judiciary Committee hearing. “We have a new economy that the workforce can’t transition to without this.”

As the country’s largest pension fund, CalPERS manages over $469 billion in assets and pays benefits to more than 1.5 million public employees and retirees. CalSTRS, which provides benefits to teachers, manages a portfolio worth $254 billion.

The bill would prohibit both funds from making any additional or new investments of public employee retirement funds in a fossil fuel company, and to liquidate existing investments by July 1, 2030. A similar effort failed last year.

Opponents include the Western States Petroleum Association and CalPERS, which warns of negative financial impacts and argues that divestment would have little impact on fossil fuel companies and their emissions.

The fund said it recognizes the risk of climate change, but believes it should be addressed through advocacy in their investment practices. CalPERS spokesperson John Myers estimated the measure would affect $9.4 billion in investments.

“Divestment is a form of active risk taking. That creates volatility... and means divestment action could generate a positive or negative return,” said Danny Brown, legislative affairs chief of CalPERS. “No one can predict the future.”

A legislative analysis found divestment will likely conflict with the pension board’s fiduciary obligations

to beneficiaries. Yet many teachers and state employee associations have already passed resolutions calling for divestment from fossil fuels.

CalPERs has previously divested from the coal, tobacco and firearms industries, as well as from countries Sudan and Iran. Apart from tobacco, a report commissioned by CalPERS found those actions generated positive portfolio returns.

The fund’s attempts thus far to engage oil and gas companies, including ExxonMobil and Chevron, have not resulted in significant reduction in greenhouse gas emissions, according to a report by one of the bill’s major supporters, Fossil Free California.

The measure is supported by school faculty and nurse associations. But California’s largest labor groups, including the California Labor Federation and California Teachers Association, have yet to weigh in.

“CalPERS and CalSTERS have a lot of arguments against the bill that I personally think are outdated,” said Fossil Free California coordinating director Miriam Eide. “We have an opportunity to set a standard for the world and no longer being complicit in fossil fuel disruption.”

Another aspiring climate bill that would force large corporations doing business in California to disclose their annual greenhouse gas emissions data cleared its first hearing Tuesday.

Democratic Sen. Scott Wiener’s bill SB 253 would require the nation’s largest companies to partner with a nonprofit emissions registry to report greenhouse gas emissions related to their operations and supply chain.

Several multinational corporations already release standardized emissions data. But this measure would be the first of its kind in the country and is backed by leading environmental groups. A similar effort to promote corporate emissions transparency failed in 2021.

Supporters say requiring companies to fully report their emissions will help California consumers make informed decisions about their consumption and give policymakers access to data needed to help the state achieve decarbonization goals. A bill analysis found this is easier on companies to comply.

It is opposed by the California Chamber of Commerce and the Western States Petroleum Association, which argue the measure will hurt businesses. The state’s cap-and-trade program already has an emissions inventory, the chamber argued.

“It’s a reporting requirement that effectively will not actually reduce the emissions that it will ultimately increase costs here in California,” said a representative. “Creating a similar inventory or a shadow inventory, if you will, isn’t really going to lend itself to that.”

The final ambitious climate measure that moved forward would require corporations doing business in California to file reports on financial risks tied to climate change. SB 261 applies to firms with an annual revenue above $500 million.

“The effects of a worsening climate already affect the cost of health care, worker safety, raw materials, liability risk and the resiliency of supply chains, all of which impact our economy,” said Sen. Wiener in support. The measure was introduced by Sen. Henry Stern.

SB 261 mirrors a federal effort at the Securities and Exchange Commission that would apply to publicly traded multinationals. Similar disclosure requirements were first adopted by the International Task Force on Climate Change in 2017.

The state Chamber of Commerce, along with several other influential business associations, oppose the measure and say disclosure requirements and potential penalties would be overly burdensome.

All three bills will be move to the Senate Appropriations Committee before a floor vote.