Earlier this week, the California State Assembly approved a bill that would order the state's employee pension funds to eliminate investments in companies that make the majority of their revenue from coal. The bill has already passed the State Senate, and if signed by Governor Jerry Brown, it will make California the first state to take this step.

The bill focuses on the use of coal for electricity generation; production of coal for metallurgical uses is exempt. The board that oversees the investment funds will also have two options for maintaining their investments. One is simply if selling off the investments will violate its financial responsibilities. The second is if the companies involved provide evidence that they are transitioning away from a reliance on coal.

California oversees two pension funds: one for teachers and the second for all other state employees. Combined, the two have nearly half a trillion dollars in assets. A spokesman for the funds told Reuters that up to $240 million of that amount could be invested in coal companies.

Further Reading Stanford to divest its endowment from coal stocks

In a statement after the bill's passage, California Senate president pro tempore Kevin de León said, “Coal is losing value quickly, and investing in coal is a losing proposition for our retirees; it’s a nuisance to public health; and it’s inconsistent with our values as a state on the forefront of efforts to address global climate change. California’s utilities are phasing out coal, and it’s time our pension funds did the same.”

Governor Brown has not yet indicated whether he will sign the bill, but its passage seems likely given the idea's popularity within the state's Democratic caucus. Stanford University, which is based in California, has already undertaken a similar divestment.