The drive by climate-change activists to require the largest state pension fund to divest its fossil-fuel portfolio is picking up steam in Albany, despite the opposition from several public-employee unions worried that such a sell-off would hurt the fund’s bottom line.
The Fossil Fuel Divestment Act, sponsored by State Sen. Liz Krueger and Assemblyman Felix Ortiz, would require State Comptroller Thomas P. DiNapoli to divest the state’s holdings in 200 of the largest fossil-fuel corporations over the next five years, with a more expedited sell-off for poorly performing coal-company stocks.
Bill Gaining Sponsors
In the weeks leading up to an April 30 legislative hearing in Albany on the bill, boosters of divestment picked up 10 co-sponsors, giving them 28 in the State Senate and 38 in the Assembly.
The battle over how the state’s Common Retirement Fund deals with the issue of accelerating climate change pits Mr. DiNapoli, who believes he can do more to address the issue using the fund’s status as a major shareholder, against Governor Cuomo and a growing cohort of state legislators pressing for divestment.
The Comptroller’s strategy was dealt a significant blow last month when lawyers for the U.S. Securities and Exchange Commission ruled that Exxon Mobil could keep off its May 29 annual meeting agenda a shareholder resolution he championed to have the multinational corporation disclose goals for reducing greenhouse-gas emissions in line with goals set by the 2015 Paris climate agreement.
The Associated Press reported the SEC’s corporate-finance division informed both sides in the climate-change proxy battle “that it would not recommend enforcement action against Exxon if the company keeps the item off its annual shareholder meeting…. in effect, a green light for Exxon to drop the matter.”
‘Bump in the Road’
Mr. DiNapoli downplayed the setback as just “a bump in the road” after significant successes like a 2017 shareholder measure that passed over Exxon’s board opposition making the company detail how climate-change policies could affect its bottom line.
According to published reports, the $207-billion state retirement fund is holding $13 billion in fossil-fuel stocks.
“Climate change is the single greatest threat facing humanity; the only rational response is to use every tool at our disposal to prevent and mitigate its most-catastrophic impacts,” Ms. Krueger said at the hearing. “Divesting our state pension fund from fossil fuels will protect workers and retirees from the rapid loss of valuation that fossil-fuel companies will suffer in the coming energy transition.”
Anastasia Titarchuk, the Comptroller’s Interim Chief Investment Officer, warned that the Divestment Act “calls for the pension fund to lose a billion dollars before any action is taken. A billion dollars, if we assume a seven-percent rate of return over 30 years, can turn into $9.7 billion.”
She told the legislative panel that disregarding such a hit was “not consistent” with the state’s fiduciary obligations to both its workforce and the public, because it would require that “3,000 local governments and taxpayers” make up for the lost returns.
Questions Bill’s Legality
“Given the Fund’s global leadership on addressing climate change-related investment risks, it should not be surprising that we take issue with the Legislature’s attempt to mandate these specific investment decisions for us,” she testified. “All attempts by the Legislature to mandate specific investment decisions have been struck down for violating the Comptroller’s independent discretion. Because this legislation, in requiring divestment from 200 specific companies, mandates very specific investment decisions, it would be vulnerable to legal challenges and likely found unconstitutional.”
Dealing with climate change has divided the public-union movement with District Council 37 embracing fossil-fuel divestment and the Suffolk County Association of Municipal Employees opposing it.
Boosters of divestment argue it is essential to both slow global warming and insulate the pension fund from what they predict will be a marked decline in the fossil-fuel sector. Opponents warn the strategy deprives the pension funds of reliable performers.
Leading up to the legislative hearing in Albany, the Suffolk AME released an independent investment analysis claiming that a divestment from fossil-fuel stocks to “green energy” companies would “substantially underperform fossil fuels and result in state pension shortfalls that would require” an additional $33.4-billion cash infusion over 30 years.
“The findings from this report should serve as a loud wake-up call to New York’s taxpayers, which includes the men and women who perform the essential government services that New Yorkers rely upon every day,” Daniel C. Levler, president of Suffolk AME, said in a statement.
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