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February 8, 2017

New York City Pensions Analyzing “Carbon Footprint,” Reiterate Opposition to Divestment

Divestment activists continue to face an uphill battle, even in New York.

The latest development comes as New York City Comptroller Scott Stringer just announced a new “carbon footprint” analysis of the city’s five pension funds – a total of more than $170 billion in assets — to decide if any funds can be diverted to “help fight climate change.”

Interestingly, divestment groups like 350.org are hailing this announcement as a victory, and falsely equating this general study with an intention to divest. In reality, divestment advocates have continually run into significant roadblocks in the state of New York.

Just last October, New York First Deputy Comptroller Pete Grannis forcefully argued against divestment at a forum held at Baruch College in Manhattan, stating plainly, “we’re not social investors.”  He proceeded to directly challenge Steven Heintz of the Rockefeller Brothers Fund, which so happens to be a major fiscal sponsor of 350.org and is one of divestment’s most vocal advocates.

Meanwhile his boss, New York State Comptroller Tom DiNapoli, has repeatedly refused to divest and has been extremely vocal in his opposition to selling off fossil fuels.  In December 2015 in the midst of a legislative push to mandate fossil fuel divestment statewide, DiNapoli wrote a letter to State Sen. Liz Krueger detailing his reasons for rejecting divestment:

“While I share your concerns about the risks of carbon emissions and applaud you and your colleagues for your advocacy, my fiduciary duty requires me to focus on the long-term value of the Fund.  To achieve that objective the Fund works to maximize returns and minimize risks.  Key to accomplishing this objective is diversifying the Fund’s investments across sectors and asset classes – including the energy sector, where fossil fuels continue to play an integral role in powering the world’s electricity generators, industry, transportation and infrastructure.”

According to DiNapoli, the fund had $3.68 billion in “Carbon 200” company holdings as of Sept. 20, 2015.  Those investments netted the fund about $1.5 billion from 2010 – 2015 despite a downturn in commodity prices.

Questions still remain about Comptroller Stringer and if he will stay true to this fiduciary duty or if he will put politics over pensioners. Though he has spoken out against the fossil fuel industry in the past, Stringer has so far opted for a strategy of engagement over divestment.  Time will tell if his potential run for the Mayor’s office will further politicize his engagement efforts, but pensioners can at least rest assure for now that divestment remains on the sidelines.

Even in a state that has said “no” to responsible energy development, divestment has not been able to take hold—most likely because of the mounting costs, financial losses, and foregone returns that accompany the act of selling off fossil fuels.   With the S&P Energy index now on the upswing, Comptrollers Stringer and DiNapoli would be wise to continue their focus on fiduciary duty for pensioners and say no to costly divestment pushes.  That may not satisfy divestment activists, but it is the right choice for the retirees of New York.