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Now the $189bn NY City funds are divesting fossil fuels, what about the $191bn NY State Common Fund?

State Comptroller Thomas DiNapoli has to respond to a legal Bill on pulling out of brown companies.

The city of New York’s multi-billion dollar climate change lawsuit against the world’s biggest oil majors – BP, Chevron, ConocoPhillips, Exxon Mobil, and Royal Dutch Shell – filed to federal court in New York on Tuesday night will naturally make the world’s headlines. The lawsuit – reminiscent of the fight against big tobacco – will likely run and run. It is hugely important in putting climate polluters on watch over potential legal liability; but it could easily become a lengthy political and legal stand off.
For investors, the more immediate story should be the announcement by New York City Comptroller Scott Stringer that the city’s five public pension funds, running assets of $189bn, will withdraw the entire $5bn of their investment holdings in 190 fossil fuel companies within five years. That’s a huge amount of money to be moving from brown to green assets in a relatively short timeframe, while maintaining investment returns. This will be a major pension fund green investment transition test case, no doubt. And if it doesn’t deliver, could run no little fiduciary legal risk in itself.
Intriguingly, it puts the spotlight back on Thomas DiNapoli, the New York State Comptroller who oversees the even larger $192bn New York State Common Retirement Fund – the third largest public pension plan in the US – which runs the assets of state employees.
Arguably, it is DiNapoli not Stringer who has come under more pressure to act. DiNapoli is currently legally obliged to respond to a State Bill filed by State Senator Liz Krueger, along with Assembly Assistant Speaker Felix W. Ortiz, called the Fossil Fuel Divestment Act in the State Legislature: bill number (S4596/A3712).
The Bill has passed the State Senate and Assembly, and awaits adoption or rejection by Di Napoli.
It would require the State Comptroller to divest the Common Fund from holdings in the 200 largest publicly traded fossil fuel companies as defined by carbon content in the companies’ proven oil, gas, and coal reserves (the CU 200).Divestment from coal companies would have to be completed within one year; divestment from all other fossil fuel companies would be made within five. Currently, ExxonMobil represents the largest single CU200 holding in the CRF, with around $1bn invested.
RI has been reporting on Krueger’s bill since it became public in 2015.
Krueger spoke at our 2015 RI Americas conference on her bill. I think few took it seriously at the time. But Krueger is a determined character, and she is making a lot of waves now! The influence on New York City Comptroller Stringer looks clear. Just last month, RI was reporting that Stringer would propose ways to de-carbonize the five New York City Pension Fund portfolios
The latest declaration of full fossil fuel divestment in five years is a major move on from that position!
Will DiNapoli respond to Krueger’s Bill with a statement to divest in five?
Maybe, although he recently said the fund had “no immediate plans to divest our energy holdings”. State Governor Andrew Cuomo has called for the Common Fund to develop a plan to “de-carbonize” its portfolio. Cuomo said he and DiNapoli would work together to create an advisory committee of “financial, economic, scientific, business and workforce representatives” to develop a de-carbonization roadmap and “send a strong message to the financial markets that major investors, including New York State, are fully and aggressively committed to a carbon-free, clean energy future.”
The fund has already invested $2bn in a low-carbon index with Goldman Sachs and in March 2017 NY Common said it would evaluate all of its external managers on ESG grounds.
Either way, it’s all eyes now on the State Common Fund as to how it will respond to its sister City pension funds divestment timeline.