February 27, 2019

DiNapoli Levies Strong Words Against Divestment Advocates Ahead of Lobbying Day at the NY State Capitol

As divestment campaigners gather in Albany today to show support for State Senator Kruger and Assemblyman Ortiz’s divestment legislation, they’d do well to consider the words of an important detractor— the head of the pension fund, New York State Comptroller Thomas DiNapoli.

For starters, DiNapoli is actually in charge of investment decisions for the New York State Common Retirement Fund. He is widely recognized as an exemplary fund manager not only by his constituents but also by the Asset Owners Disclosure Project and – perhaps most importantly—he is legally mandated to maximize funds for New York’s retirees.  And what does he repeatedly say about divestment?  It’s expensive and ineffective.

Comptroller DiNapoli’s letter to Senator Kruger last week once again laid bare the many issues with fossil fuel development, among them:

“…there is no evidence that divesting the Fund from owners of fossil fuel reserves would do anything to actually mitigate climate change.”

“[the Fund] has earned over $4 billion over the last 10 years from the same ‘fossil fuels’ companies identified in the 2018 Corporate Knights Study.”

“… an investment decision such as divestment requires a financial and economic analysis demonstrating that divesting would not have a negative economic impact on the Fund.”

And finally,

 “Divestment must only be for financial reasons, not symbolic purposes.”

This reasoning stands in stark contrast to that of New York City Comptroller Scott Stringer who, in a flashy press conference with Mayor De Blasio and divestment advocate Bill McKibben, announced the city’s pensions would be divesting from fossil fuels.  Despite the fanfare and high praise from the activist community, New York City’s pension funds – all politics, no action.

Sen. Kruger’s efforts have also been rejected many times before – with DiNapoli opposing divestment each time.

DiNapoli’s repeated arguments against divestment highlight that this type of empty investment decision is not part of an environmental solution.  Instead of divestment, the New York State Common Retirement Fund has taken an engagement approach, filing over 140 shareholder resolutions with companies to encourage them to analyze climate risks and decarbonize their business operations, participating in several UN Climate Change Conferences, advocating for the Paris Agreement, the Clean Power Plan, fuel efficiency standards, and carbon pricing, as well as committing $10 billion to sustainable investments.

Do you know who else is investing billions towards environmental solutions? Oil companies, the same companies divestment advocates seek to stigmatize.

Let’s also not ignore the real financial impact of divestment. Previous economic reports put the price tag of divestment for New York’s pension to an annual impact between $136 million and $198 million. To put these numbers into perspective, the average pension for retirees in the Employee’s Retirement System (ERS) was $23,026 in FY 2017. A $198 million loss due to divestment equals the yearly pension payments for 8,598 ERS retirees.

Is the state’s leadership ready for this price tag?

Bottom Line:  Divestment efforts at the state level have failed many times before given the high costs for pensioners and its inability to help the environment. The New York State pension system is well-funded because it is well-managed, and the Comptroller responsible for that says no to divestment.