Massive fund portfolio will fully decarbonize — setting worldwide example
December 20, 2020
By Ramona du Houx
On December 9, 2020, the man, Comptroller Tom DiNapoli, who controls investments for the 226 billion New York State Common Retirement Fund announced that the fund is moving to divest from the riskiest oil and gas companies by 2025, and decarbonize by 2040. It creates the most comprehensive program of any large public fund worldwide to divest from fossil fuels, decarbonize across a massive portfolio, and put major financial pressure on public companies — from auto companies to utilities — to align their operations with the scale of climate action needed to stave off worldwide catastrophe.
After Superstorm Sandy devastated the Northeast in 2012, costing nearly $70 billion in damages, the #DivestNY campaign was born. The coalition, composed of over 40 groups, helped put pressure on Comptroller DiNapoli, while the State Assembly proposed divestment legislation. Governor Andrew Cuomo said in 2017 that he would push for divestment of the state pension. In New York, The Comptroller is responsible for the pension fund investments in order to have transparency.
“As a member of the Divest NY coalition, a Financial Advisor, and a Town Councilor in the Town of Manlius, I am overjoyed at the success of the campaign to divest the New York State Common Retirement Fund from fossil fuel companies. It is not often that a group of activists and citizens can come together and truly change the world. The hard work and dedication from the people of Divest NY is nothing short of awe-inspiring. I applaud the decision of the Comptroller to move forward with this comprehensive fossil fuel divestment strategy, ensuring not only the financial performance of the pension fund, but also the future of the planet. I thank him for his leadership and for his commitment to my daughters’ future, the future of New Yorkers, and the future of all people, all around the world,” said Katelyn M. Kriesel, Manlius Town Councilmember, Elected Officials to Protect America-New York Leadership Council.
New York State Assistant Speaker Félix W. Ortiz, and State Senator Liz Krueger are the lawmakers who co-prime sponsored divestment legislation and pushed for such historic action. They were key to negotiations with the Comptroller and agreed to pull their proposed bill in the legislature for Divestment.
“The New York State Common Retirement Fund is the third largest pension fund in the country, and when it takes action, people pay attention. Rigorous and timely review, with divestment for climate laggards across the energy sector, and a commitment to a net zero portfolio by 2040 will protect the fund, current and future retirees, and taxpayers from unacceptable levels of climate risk. It also sends a clear message that the era of dirty fossil fuels must and will come to an end, and the smart money is getting out sooner rather than later. This announcement is a big deal, and it is a win-win for the State Pension Fund’s bottom line, and the future survival of our society,” said Krueger
The Comptroller’s plan is modeled on the Fossil Fuel Divestment Act (A.1536-A/S.2126-B), the bill introduced in the Assembly in 2015.
“As a lifelong champion of the environment, I am delighted that my initiative has become a part of New York’s progressive environmental agenda,” said Ortiz. “Today’s announcement is a win for all New Yorkers. Investing in companies that produce, support or promote fossil fuels is hazardous to the future of the climate and pensioner’s finances. All of us have the ability and the responsibility to enact powerful positive change for future generations through advocacy and determination. New York can’t afford to wait.”
The victory sets the bar for climate finance action ahead of COP26 next year in Scotland. To date, over 1300 institutions representing more than $14 trillion in assets have committed to some level of fossil fuel divestment.
“I’m heartened to hear the agreement is aligned with the goals outlined in the Paris Accord. I’m proud to have signed a divestment letter with over 250 Elected Officials to Protect America -New York asking the Comptroller to make the right fiduciary decision and protect the pension fund,” said Albany County Legislator William Reinhardt, Elected Officials to Protect America-New York Leadership Council. “The coalition that brought us together have shown leadership and courage standing up to the oil industry to ensure our public servants need not worry about their retirement investments, and for a brighter tomorrow for all. It is my hope that New York’s actions will start a domino effect as other states realize the need to divest their pension funds.”
Comptroller DiNapoli is taking a systematic approach to his review and assessment of each fossil fuel company sub-sector, with a process grounded in fiduciary responsibility. The results of the first review, targeting coal, was completed earlier this year the divestment of 22 coal companies. Similar divestment action is anticipated from the current tar sands review, which is set to conclude in January.
Next on the agenda, the Comptroller will review fracking companies, then Oil majors, fossil fuel service companies, and oil/gas transportation and pipelines. All reviews and divestment actions will be completed by 2025.
New York State banned fracking in 2015, but until the review is completed has been investing in fracking companies. The ban itself did influence other countries. “Like New York’s ban on fracking, this move will garner global attention and praise, and it makes good economic sense,” said Bob Rossi, Executive Director of the New York Sustainable Business Council. “While the future of fossil fuel investments looks grim, the clean energy sector is booming with tech innovation and accelerating popular demand. New York should capitalize on this energy transition.”
Just like New York City’s 2018 announcement of a five-year plan to divest its massive pension funds from fossil fuels, the announcement is expected to reverberate globally, encouraging divestment and climate finance campaigns across the nation and around the world.
“I’m heartened to hear the agreement is aligned with the goals outlined in the Paris Accord. I’m proud to have signed a divestment letter with over 250 Elected Officials to Protect America -New York asking the Comptroller to make the right fiduciary decision and protect the pension fund,” said Albany County Legislator William Reinhardt, Elected Officials to Protect America-New York Leadership Council. “The coalition that brought us together have shown leadership and courage standing up to the oil industry to ensure our public servants need not worry about their retirement investments, and for a brighter tomorrow for all. It is my hope that New York’s actions will start a domino effect as other states realize the need to divest their pension funds.”
Just a week following New York’s divestment announcement The Rockefeller Foundation, a 107-year-old philanthropy built by oil tycoon John D. Rockefeller, said it will dump its fossil fuel holdings, and will not make any new investments in the dying sector. The Rockefeller Foundation was founded by oil money. The endowment was largely built from the proceeds of Standard Oil. ExxonMobil (XOM) traces its roots to Standard Oil.
NYS-CRF historically has held over $12 billion in fossil fuels, including more than $1 billion invested in ExxonMobil alone. Divestment will ensure that the New York State fund will end such financing.
Fossil fuel companies lost a lot of money in 2020, and not just because of the drop in demand for oil and gas caused by the pandemic. The divestment movement scored major wins as schools, faith institutions, and cities all over the world made new pledges to pull their investments from companies that extract and sell fossil fuels.
Prestigious schools like Oxford and Cambridge in the U.K., and Georgetown, Brown, American University, and Cornell in the U.S., joined a growing list of colleges and universities planning to divest their endowments from fossil fuel companies. Pressure mounted on two of the wealthiest universities in the country, Harvard and Yale, which have a combined endowment of $72 billion, as divestment activists ran for open seats on the boards that oversee the teams that manage how their endowments are invested. And while neither school committed to divestment, Harvard is dipping its toes in the concept with the announcement of a still-vague plan to bring its endowment to net-zero by 2050, arguing that it will be able to work with fossil fuel companies to achieve it.
“This victory – after years of campaigning by so many people – is a great victory for the climate, because it both demonstrates the waning power of the fossil fuel industry and because it accelerates that decline. It is a morally bankrupt industry, and increasingly a financially bankrupt one as well,” said Bill McKibben, co-founder 350.org and part of the collation.
New York’s commitment to decarbonize the Fund by 2040 is ten years sooner than any other U.S. pension fund. This plan also includes interim trajectory goals, rigorous reporting, staff hiring, and transparency.
“As the economic risks from climate change have mounted, it makes clearer the need for bolder action by government, business and investors. We can build an economy by redirecting our assets out of fossil fuels and into investments in all sectors that enable a more equitable and sustainable economy,” said David Levine, President, American Sustainable Business Council. “On behalf of the over 250,000 businesses and investors we represent, we applaud the NY State Comptroller in setting the bar high with a comprehensive climate action plan as an example for the rest of the country to follow.”
The announcement also builds momentum for activists and experts to convince the $120 billion New York State Teachers’ pension fund to divest. The #DivestNY coalition will continue to work alongside Comptroller DiNapoli, the expanding team at the Comptroller’s office working on climate finance, and public officials at all levels to ensure this commitment, its benchmarks, and a fossil free world become reality.
