Memo – Divest Pension Funds from Fossil Fuels

Divest the State’s Public Pension Funds from Fossil Fuels Companies
A8011 (Ortiz) / S5873 (Krueger)

The State pension fund should not be invested in companies that contribute to catastrophic climate change that has already inflicted tens of billions of dollars’ worth of damage in NYS, starting with Hurricane Sandy.

According to NYS OSC, the NYS Common Retirement Fund, with an estimated value of $180 billion, has $5.12 billion invested in the top 200 Carbon Underground fossil fuel corporations. These publicly­ held companies own the vast majority of fossil fuel reserves underground­­ their stock prices and business plans depend on digging up and burning these reserves.

The international scientific consensus is that we have to keep 80% of the existing fossil fuels in the ground to keep below 2°C of warming — anything more than that risks catastrophe for life on earth. (Many scientists feel that even more stringent restrictions are needed to keep us below 1.5°C warming). Fossil fuel corporations now have 2,795 gigatons in their coal, oil and gas reserves, five times the safe amount.

If it’s wrong for these companies to wreck the planet, then it’s wrong to profit from that wreckage. The legislative should immediately freeze any new investment by public pension plans in fossil fuel companies, and divest from direct ownership and any commingled funds that include fossil fuel public equities and corporate bonds within 5 years.

The Intergovernmental Panel on Climate Change (IPCC) has released multiple reports that find climate change is causing dangerous and costly disruption of human and natural systems including the melting of Arctic ice, a rise in ocean acidity, a rise in global mean surface temperatures, the retreat of glaciers, an increase in extreme storm events, drought, increasing threat to global water and food supplies, loss of biodiversity and increasing risk of civil hardship, warfare and refugee dislocation.

The State has a fiduciary responsibility to protect the retirement funds of public workers from risky investments. Investing in fossil fuels poses increasing financial risk and loss to the CRF, thus its beneficiaries.  Former Acting State Comptroller Tom Sanzillo last year urged the state to immediately divest from coal and seriously consider complete fossil fuel divestment. The state pension fund investment in coal has lost a $100 million since that recommendation was made.

Falling coal and oil prices, along with renewables now becoming cheaper than burning greenhouse gases, highlights the financial case for rapid divestment.  Investors are increasingly voicing their concerns about the fossil fuel industry’s long term financial viability, and opposing new capital expenditures aimed at discovering new coal, oil and gas reserves. Investors are concerned about the increasing action by governments’ worldwide to restrict and tax the use of fossil fuels.

The State Comptroller has resisted divestment, arguing for shareholder advocacy instead. Certainly it is helpful to use the voting rights of pension to move companies to adopt more environmentally responsible practices. The comptroller should continue to lead shareholder advocacy campaigns to set greenhouse gas emission goals, improve energy efficiency across operations and source more renewable energy. But, there is an inherent conflict of interest for investors to advocate that coal, oil and gas companies stop the production of fossil fuels given that it is their core business. Shareholder advocacy is not an effective tool for changing the overall orientation of industries whose business models depend on producing fossil fuels.

There are now index funds available such as Blackrock that excludes fossil fuels.


Green Education and Legal Fund.