State divestment bill 350.NYC Feb 28 2016

Testimony of 350NYC
To a Public Forum on
Divesting the State Common Retirement Fund
From Fossil Fuel Holdings
By Assemblymember Felix Ortiz and Senator Liz Krueger
February 29, 2016, Albany NY

Thank you for the opportunity to testify today on behalf of 350NYC. 350NYC is a local affiliate of, a grassroots network of volunteer-run campaigns in over 188 countries working to solve the climate crisis. My name is Mark Dunlea, and I am a member of the steering committee of 350NYC.

350NYC supports passage of the state legislation (A8011 / S5873) to divest the state pension plan from fossil fuels. New York State’s pension funds should cease making any new investments in fossil fuel companies and completely divest from them within 5 years. It should immediately divest from coal (and Exxon).

New York State’s current policy to invest indefinitely in fossil fuel companies contradicts our state’s role as a national leader on transitioning to clean energy and climate resiliency, and puts our State’s communities and pension fund at risk. New York State cannot commit to the steps necessary to prevent climate change while maintaining a financial interest in companies profiting from practices that cause climate change.

Both Mayor De Blasio and Vermont Governor Shumlin has recently called to divest public pension funds from coal; the latter also proposed divestment from Exxon. The California State legislature voted earlier this year to divest from coal after it was disclosed that the state pension program had lost $5 billion [1] last year from its investment in fossil fuels.

New York State should immediately divest from Exxon, which is being investigated by the State Attorney General for allegedly deceiving the public and investors about the reality of climate change. As the state’s Attorney General investigates Exxon Mobil to determine whether the company lied to the public about the risks of climate change or to investors about how such risks might hurt the oil business, NYS’s retirement system continues to invest, directly, around a billion dollars in the company. Exxon’s stock price has dropped 13 percent from March 31st 2015 to Jan 20th 2016.

350 takes its name from the need to keep the level of carbon dioxide in the atmosphere below 350 parts per million. Since the beginning of human civilization, our atmosphere contained about 275 ppm of carbon dioxide. That is the planet “on which civilization developed and to which life on earth is adapted.”

Beginning in the 18th century, humans began to burn coal, gas, and oil to produce energy and goods. Right now we’re at 400 ppm. Unless we are able to rapidly turn that around and return to below 350 ppm this century, we risk triggering tipping points and irreversible impacts that could send climate change spinning truly beyond our control.

So far, we’ve experienced about 1 degree (Celsius) of warming, and the impacts are frightening. . Glaciers everywhere are melting and disappearing fast, threatening the primary source of clean water for millions of people. Mosquitoes, who like a warmer world, are spreading into lots of new places, and bringing malaria and dengue fever with them. Drought is becoming much more common, making food harder to grow in many places. Sea levels have begun to rise, and scientists warn that they could go up as much as ten feet this century. If that happens, many of the world’s cities (e.g., NY), island nations, and farmland will be underwater. Meanwhile, the oceans are growing more acidic because of the CO2 they are absorbing, which makes it harder for animals like corals and clams to build their shells and exoskeletons.

The international scientific consensus is that we have to keep 80% of the existing fossil fuels in the ground to avoid catastrophic climate change. Fossil fuel corporations now have 2,795 gigatons in their coal, oil and gas reserves, five times the safe amount.

All around the globe, we’re stacking the deck for extreme weather — like hurricanes, typhoons, blizzards, and droughts — which exacerbates conflicts and security issues in regions that are already strapped for resources. The refugee crisis in Europe has been fueled by the drought in Syria. We are in the midst of the sixth great die-off of species in the planet’s history – and humans’ own fate are threatened by that extinction crisis.

Hurricane Sandy decimated the New York City and Long Island areas, causing $65 billion in damage. Sandy was fueled in part by Atlantic waters that were 5 degrees warmer than average, a result of human-induced climate change. And yet, New York City’s and State’s pension funds for public employees are all invested in coal, oil and gas companies that dump carbon into the atmosphere for free, and rig the political system so that they can continue to do so.

As Bill McKibben of has noted, if it is wrong to wreck the climate, then it is wrong to profit from that wreckage. What level of insanity does it take to justify investing in something that there is a scientific consensus threatens the ability of humans to survive on this planet? Especially when any rationale observer understands that investments in fossil fuels is so risky at this point.

Just like in the struggle for Civil Rights here in America or the fight to end Apartheid in South Africa, the more we can make climate change a deeply moral issue, the more we will push society towards action. Divestment builds political power by forcing our nation’s most prominent institutions and individuals to choose which side of the issue they are on. While sale of stock might not have an immediate impact on a fossil fuel company, especially one as gigantic as Exxon, what it does do is start to sow uncertainty about the viability of the fossil fuel industry’s business model.

The Comptroller says that $5.3 billion of New York State pension funds are invested in coal, oil, and gas out of a total of $160.7 billion. If you broaden the search to include other oil/gas and coal producers, refineries, pipeline companies, and oilfield services, NYS holds around $6 billion, in fossil fuel equity (this does not include fixed income or other asset classes). Conversely, it appears that the state pension fund has less than half-a billion dollars of “clean energy” equity investments (solar and wind). NYS has more invested in Exxon than all of its clean energy investments combined.

In June last year, the state made the ban on hydraulic fracturing official. But the state’s pension system continues to invest heavily in fracking companies. From Big Oil with significant fracking productions, like Chevron, ExxonMobil and ConocoPhillips, to companies that specialize in fracking, like Weatherford, and C&J Energy Services

New York Gov. Andrew Cuomo said on January 13th he aims to phase out coal-fired power plants in the state by 2020. NYS continues to invest in the world’s largest coal reserve holders, 50 of the top 100.

Divesting all fossil fuels from the New York State pension fund is an act of long-term fiduciary responsibility that will protect the well-being of New York State’s pensioners and citizens. We should also require SUNY and CUNY to divest from the top 200 fossil fuel companies in the university’s college portfolios.

The CRF is one of the largest and most visible institutional investors in the world. By divesting from fossil fuels, the CRF will send a message that it is unacceptable for any institution to profit from activities that threaten the future of our society, and will begin the process of delegitimizing a business model that is socially and morally bankrupt. As a state we cannot commit to the steps necessary to prevent climate change while maintaining a financial interest in companies whose profits depend on the continuation of practices that cause climate change. As Upton Sinclair wrote, “it is difficult to get a man to understand something when his salary depends on his not understanding it.”

Financial analysts and experts are increasingly worried about the risk of a carbon bubble that will arise if coal, oil and gas reserves become stranded assets. If governments meet their commitment to keep global warming below 1.5°C, they will need to pass regulations that force fossil fuel companies to keep 80% of their fossil fuel reserves underground. The accessibility of those reserves are a major factor in determining these companies’ share price. Once the reserves are marked as unburnable, the value of the fossil fuel industry could plummet, to the tune of trillions of dollars.

The future prospects for fossil fuel companies are suffering, and in coming years, increasingly, will suffer from at least four rapidly evolving developments triggered by growing global awareness of the existential threat that climate change poses for the planet:
(a) Governmental restrictions on carbon release, leading to the stranding of carbonbearing fossil fuel assets carried on the balance sheets of fossil fuel companies.
(b) Advances in alternative sources of energy for power, electricity and transportation,resulting in a lessening demand for coal, gas and oil.
(c) A rising tide of public action at the grass-roots level, including actions by stockholder groups, against fossil fuel companies, demanding such obvious steps as cessation of CAPEX on exploration and development of more fossil fuel.
(d) Growing reputational effects from the foregoing, turning fossil fuel companies into pariahs, with adverse consequences for hiring, employee morale and motivation, stockholder satisfaction and equity valuations.

An international study released this week found that the size of carbon budget to avoid catastrophic change had to be cut in least in half. Instead of a range of permissible emissions estimates that ranged up to 2,390 billion tons from 2015 onwards, the very most humans could release would be 1,240 billion tons (and this is based on the higher 2 degree target).[2] There is general agreement that a limit of 590 billion tons would safely keep the world from overheating in ways that would impose ever greater strains on human society. The argument is about the upper limit of such estimates.

As NYC City Council member Helen Rosenthal pointed out in a letter to the trustees of the NYC pension fund, “In the past, long-term investors could count on cycles of low and high prices and low energy prices rebounding over time. However, fossil fuel investments are now increasingly at risk from a variety of factors, such as government regulation of greenhouse gas emissions, energy conservation and efficiency, and the increasing competitiveness of renewable energy. For example, the current devaluation of coal companies, several of which have already declared bankruptcy, is widely recognized to be caused, at least in part, by new regulations concerning carbon emissions.”

She added that “recently published analyses that suggest investment strategies deemphasizing fossil fuels may deliver superior returns, while avoiding the degree of volatility and risk associated with investments in this sector. For example, a study recently released by MSCI – the world’s leading provider of stock market indices, used by more than 6,000 pension funds and hedge funds globally – found that investors who divested from fossil fuel companies would have earned an average return of 13% a year since 2010, compared to the 11.8% return earned by conventional investors.”

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.

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.

A growing number of leading financial, business and government leaders have warned that investing in fossil fuels presents an increasing risk to the fiduciary soundness of investment portfolios. This warning is based on a cumulative understanding of the science of climate risk, nation based policies to reduce fossil fuel use, the growing likelihood of international accords on climate and significant market penetration and growing profitability of renewables and energy efficiency across the globe.

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 – as unsuccessful as they have been to date – to set greenhouse gas emission goals, improve energy efficiency across operations and source more renewable energy. However it is extremely unlikely that a board of a fossil fuel company is going to agree to 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.

fossil fuel companies can and have argued to the SEC for a dismissal for any number of reasons, one of them being the resolution deals with the company’s ordinary business of extracting fossil fuels. There have been no significant direct reductions in the production of fossil fuels achieved through shareholder advocacy over the last two decades. There is no evidence that engagement is an effective tool to prohibit the fossil fuel industry from growing their core business, producing fossil fuels. If the resolution comes to a vote and is passed it is legally non binding unless it contains language to make it so

The Comptroller’s staff have told divestment advocates that he wanted to wait until a study on climate risk for investment by Mercer was completed. That study was released in June 2015. DiNapoli was quoted in the release on the study, saying “This report highlights that investors should see the opportunities in addition to the risks from climate change. The tides are turning toward a low carbon future and away from the unsustainable status quo.” Most observers read the study as highlighting the risks associated with investments in fossil fuels.

DiNapoli and four other Exxon Mobil shareholders asked the U.S. Securities and Exchange Commission this week to force the company to include a shareholder proposal in its annual proxy that, if approved, would require Exxon to report annually how it could be affected by climate change regulations. The Comptroller, the sole trustee of the state pension plan, has a billion dollars invested in Exxon.

It is also rather strange for the State Comptroller to ask Exxon to study climate change regulations at a time when the NY State Attorney General is investigating whether to bring criminal and/or civil actions against Exxon for lying to the world about the realities of climate change. The Comptroller needs to tell Exxon that they and other companies have to keep 80% of their fossil fuel reserves in the ground. The best way for Mr. DiNapoli to send Exxon a message is for the state to divest the state pension plan from all fossil fuels.