Late last month, California’s Insurance Commissioner announced that he had “asked all insurance companies doing business in California to voluntarily divest from their investments in thermal coal”.  Thermal coal, also known as steam coal, is coal that is used to power steam generators. According to to the U.S. Energy Information Administration, coal is the most significant source of electricity generation in the United States.  It accounts for 39% of the 4,093 billion kilowatthours of electricity generated in 2014.  Fossil fuels (coal, natural gas and petroleum) together account for 67% of the electricity generated in this country.

The Insurance Commissioner also announced that he will also be asking insurance companies to provide detailed disclosures about their investment in the carbon economy:

I am also announcing that insurance companies doing business in California will be asked to provide to the Department of Insurance detailed and specific financial disclosures of their investments in the carbon economy including coal, oil and gas. We will make this new information public so that investors, policyholders, regulators and the general public can know the extent to which insurance companies are invested in the carbon economy.

Although phrased as an “ask”, the Commissioner’s announcement repeatedly refers to these disclosures as requirements.  If the Commissioner intends to require the disclosures, he will need to comply with the rulemaking provisions of the California Administrative Procedure Act.

The Commissioner’s announcement includes some dubious assertions.  For example, he claims “Two of the world’s largest pension funds—CalSTRS and CalPERS—have been required by the state legislature to divest their thermal coal investments by July 2017.”  Although that has been how SB 185 (De León) has been characterized, the bill includes a significant exception – the governing board of each of these two systems is not required 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. Cal. Gov’t Code § 7513.75(f).  See California’s New “Thermal Coal” Divestment Law Forces Fiduciary Duty Question.