Comptroller weighs portfolio picks amid divestment demands

DiNapoli

ALBANY — The New York State Common Retirement Fund, the nation's third-largest public pension system, issues more than $1 billion in benefits to retirees each month.

Now the fund's investment portfolio — worth about $200 billion as of Friday — has come under scrutiny from climate change activists demanding that it divest its shares in oil, natural gas and coal companies in order to affirm New York's policy goals of supporting renewable forms of energy over fossil fuels.

The fund's sole trustee is state Comptroller Tom DiNapoli, a liberal Democrat from Long Island who has held the statewide office for the past 13 years.

In an interview with CNHI, DiNapoli stressed that while the New York fund was the first in the nation to embrace a climate action plan, an immediate divestment in fossil fuel companies would not be in the interests of retirees and taxpayers.

By maintaining such investments, he said, the New York fund has a seat at the table at shareholder meetings, allowing it to try to influence corporate policies in ways that strengthen the global response to climate change, as promoted by the Paris Agreement ratified in 2016.

If the fund were to sell its stakes in the fossil fuel sector, DiNapoli said, "Frankly what will happen is the stock would be bought by someone else who does not have our position on this issue. I'm sure that many companies would be very happy if we just sold the stock and did not bother them any more on this issue."

That doesn't mean DiNapoli will stubbornly cling to those investments if the companies show no interest in heading in more sustainable directions.

On July 15, the fund divested from 22 thermal coal companies. While the $90 million pulled out of those investments was a relatively minor shift for a fund with such massive holdings, the move won immediate praise from green energy advocates.

“There’s obviously no future in thermal coal and the Comptroller has recognized this and moved the pension fund for over 1 million New Yorkers out of this financially risky and destructive industry,” said Dominique Thomas, Northeast regional organizer for 350.org, a climate advocacy organization.

DiNapoli said he is continuing to evaluate his options with other investments in oil companies, but noted they are typically components of index fund holdings, making the process of divestment not as simple as it may sound.

At the statehouse, DiNapoli has to contend with a proposed measure that would mandate such a divestment. That legislation that has drawn numerous Democratic supporters in both the Assembly and Senate.

It asserts that the Legislature has a "fiduciary responsibility" over the pension fund.

"Continued investment in fossil fuel producers poses unacceptable risk to the long-term sustainability of the Fund," the bill states.

The comptroller, former Assembly member himself, contended the legislation is seriously flawed.

"It would be an intrusion by the Legislature into the independent management of the pension fund," he said. "However you feel about the issue, I think that it would be a terrible precedent."

Should the legislation win approval, he predicted, it would likely be challenged in court.

From another part of the spectrum, some question any effort to use the fund as a vehicle to drive alterations in corporate policy.

"The pension fund shouldn’t be used to advance any comptroller’s vision or preferences on environmental policy, or in any other area," said E.J. McMahon, research director for the Empire Center for Public Policy, a conservative think tank. "The fund should be managed solely with the view of protecting taxpayers from undue risk while providing retirement security for government workers, period."

DiNapoli, though, said it is prudent to evaluate all investments and assess the risks, particularly at a time when the economy is transitioning and the health of the planet hinges on a reduction in carbon emissions.

The fund is currently reviewing its holdings in oil and extraction companies and posing questions to their executives, he said.

"If we don't get satisfactory answers, we could have additional divestments," DiNapoli said. "But we're doing it surgically. We're not doing it with a meat cleaver and just chopping everything off."

What are now fossil fuel companies, at least in some instances, are expected to shift more into renewable energy, he suggested.

"They have to be, if they're going to survive," he said.

Joe Mahoney covers the New York Statehouse for CNHI’s newspapers and websites. Reach him at jmahoney@cnhi.com

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