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October 14, 2018

OpEd Highlights High Cost of Divestment for New Yorkers

An OpEd featured in Crain’s New York this month lays out the high costs of divestment for New Yorkers, and fact checks the lack of progress seen in the city to date. Here is what IPAA’s senior vice president of operations and public affairs had to say:

“Last month divestment proponents claimed the movement is growing, an attempt to generate attention for a week of climate-change meetings in New York City and earlier in San Francisco. Yet instead of focusing on the environment—a topic we all agree is important—divestment has proven a distraction.

“For starters, divestment is costly. In order to get past the purely political rhetoric that often consumes the debate, my organization, the Independent Petroleum Association of America, has commissioned research to look at what the actual financial impact of divestment would be for both the city’s and state’s pension funds. Findings from Prof. Daniel Fischel of the University of Chicago Law School and co-authors Christopher Fiore and Todd Kendall of economic consulting firm Compass Lexecon point to substantial shortfalls in investment performance, with no impact on the environment or targeted companies.

“According to their research, divestment by New York City’s five pension funds—which are valued at roughly $175 billion and serve the city’s teachers, police, firefighters and civil servants—would cost a $98 million to 120 million annually and $1.2 billion to $1.5 trillion over 50 years. For the New York State Common Retirement Fund, a $192.4 billion fund that serves over a million retirees and beneficiaries, full fossil fuel divestment would cost up to $198 million in foregone returns every year and $1.5 trillion over 50 years.”

The piece continues, highlighting the ineffectiveness of divestment at the expense of real solutions:

“Energy companies are also investing billions in energy-efficiency and emissions-reduction technologies, efforts that should be supported by environmental proponents, not divested from. Divestment proponents want state and city leaders to put their money where their mouth is and give up fossil-fuel investments, but to do so ignores reality. Divestment is a high-cost, ineffective means of supporting the environment. It’s time divestment activists and government leaders focus on solutions and not another empty promise with a hefty price tag. After all, it’s you who will foot the bill.”

Read the full piece in Crain’s New York HERE.