As state struggles to meet green energy goals, some lawmakers want pensions funds to pull out of fossil fuels
Despite the state’s inability to phase out coal and natural gas as major energy suppliers, Springfield lawmakers are looking for new ways to decrease the impact of fossil fuels on Illinois, this time through pensions.
State Sen. Adriane Johnson, D-Buffalo Gove, and five of her General Assembly colleagues, have sponsored new legislation requiring all state-funded retirement systems begin divesting their fossil fuel holdings. The proposal also bars future investment in fossil fuel companies.
Johnson and state Rep. Will Guzzardi, D-Chicago, a co-sponsor, believe divesting in fossil fuel companies is good for the environment and the pension funds themselves.
“Fossil fuel companies have been underperforming their peers in the major indexes in the last years, and that’s only going to get worse,” Guzzardi said at a news conference promoting the bill Wednesday. “There is no amount of ‘drill baby drill’ that’s going to reverse the trends happening in our economy.”
Public pension fund earnings would have been improved if they pulled out of fossil fuel companies sooner, Guzzardi said, referencing a 2023 study conducted by the University of Waterloo in Ontario, Canada.
Six public U.S. pension funds between 2013 and 2022 would have performed 13% better, earning $21 billion more, according to the study.
In 2021, Illinois passed a major energy reform bill, the Climate and Equitable Jobs Act, to provide incentives to develop renewable energy. The goal was to have 40% of Illinois' electricity generated from sources like wind and solar by 2030.
Four years later, the state is only a third of its way to that goal.
This latest bill would require the five state-funded pension plans — for state universities, public school teachers, judges, the General Assembly, and the rest of the state's employees — to fully divest their fossil fuel holdings by 2030.
The bill does not require pensions to reinvest in clean energy or any other competitor to the fossil fuel industry, leaving the decision to fund managers.
“Of course it would be great if we can invest in renewable energies, but we’re not dictating that,” Johnson told the Sun-Times Wednesday. “We’re saying to invest in securities that are going to give us the most return, the maximum return.”
Illinois’s pension liability remains among the highest in the nation. In 2020, the state pension accounts were underfunded by more than $140 billion. As new solutions to plug that gap make their way through the legislature, any attempts to change current funding could be met with increased scrutiny from public retiree groups.
“I think it’s really important to say that this is going to strengthen our long-term fiscal outlook, and we have to align with the values that this state has stated we believe in,” Guzzardi said.