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December 20, 2017

Will New York City Turn Its Back on Pensioners, Fiduciary Duty?

Just hours after announcements from Governor Cuomo pushing — and New York State Comptroller DiNapoli again not committing to – divestment, the New York City Comptroller’s Office released an announcement previewing future divestment action by the funds.

The New York City Comptroller’s office is led by Scott Stringer on behalf of the city’s five public pension funds, funds that support the retirements of individuals like city teachers, fireman, and police officers. According to the announcement, Stringer will be presenting a proposal in upcoming weeks to the trustees of the funds “to examine ways to de-carbonize the portfolios, including the feasibility of ceasing additional investments in fossil fuels, divesting current holdings in fossil fuel companies, and increasing investments in clean energy.”

Comptroller Stringer continues that he will continue his fiduciary duty “to protect the fiscal health of the City and the retirement security of our City workers and beneficiaries.” Yet Stringer’s own comments note that fossil fuel divestment runs contradictory to this duty.

As DivestmentFacts.com reported previously, back in May 2017 Comptroller Stringer commended his office for previous coal divestments, but pushed back on calls to divest from broader energy production due to his responsibility to thousands of New York retirees. From the remarks:

“When I was a borough president I divested from guns. In fact, most of the divesting in this town has come from me. But it’s not just me. When you make a divestment decision you have to go through the fiduciary lens of our retirement system and our retirees. I commend our retirees for being here, but I don’t just represent the couple of dozen that are here, I actually represent 715,000 who depend on us for their retirement security.”

Stringer continued, noting his fiduciary duty to the city and pensioners:

Only difference between many of you and me is that I have a fiduciary responsibility. I owe it to our union and brothers and sisters. In the meantime, others there are some people who say wait a minute, don’t divest stay and fight those companies, others say that will take too long, others say if you divest the big companies like Exxon wouldn’t even notice. I happen to take it differently.  I think we have a number tools and we should use every tool at our disposal. I understand that people want to divest, but I have to come back to you with the real knowledge of what we can do but I’ll also be honest with you to tell you what we can’t do. I owe it to you, but I also owe it to the woman who struggles on the small pension, the mother who I taking care of her kids, the dad who was a coal miner.”

Stringer is not without his bias, having led anti-fracking rallies in Manhattan and waging a fight against coal companies. But to date he has understood the costs divestment can impose on pensioners and, hopefully, is aware of the poor funding position of the city’s five funds.

As Reuters reports, “The system is still not in the best of health. It is just 65.6 percent funded, far below the 80 percent level that some analysts consider healthy. It still also has $64.8 billion of unfunded liabilities.” A report from the Manhattan Institute estimates that shortfall is actually closer to $142 billion.  Divestment would only make this situation worse.

Combined, New York City’s five pensions could lose more than $1 trillion if they were to divest, according to a 2017 report from Prof. Daniel Fischel of the University of Chicago Law School.  For the sake of the thousands of New York City residents who rely on pension fund returns for their retirement, let’s hope the trustees of New York City’s Pension System reject divestment once and for all.