Despite the fact that millions of Americans are facing unprecedented economic challenges, it appears that some remain laser-focused on advancing their divestment agenda heading into the new year.
That “some” would be New York City Comptroller Scott Stringer and Mayor Bill de Blasio, who, in 2018 set an ambitious 5-year goal to divest the city’s pension programs from oil and natural gas majors. Their divestment goal, which was the product of years of sophisticated public relations campaigns by anti-fossil fuels proponents, seems to have worked. Today Comptroller Stringer’s office released a statement claiming that two out of the city’s five pension funds voted to divest their portfolios (estimated to be worth $4 billion) from fossil fuels.
What Happened to Net Zero?
As we discussed in our end-of-year review, 2020 was a pivotal year for pension and endowment fiduciaries. As divestment proponents continued to put pressure on institutional leaders and politicians, experts in finance and economics began to sound the alarm with their concerns. Nonetheless, a couple of institutions and public pension programs began introducing net-zero commitments—a solution that allowed endowment leaders to carry out their fiduciary responsibilities and reduce carbon emissions.
The net-zero approach is a two-fold solution—portfolio managers remain at the helms of what investments they anticipate will have the highest return for their fiduciaries, and portfolios reduce their carbon footprint. Last month, even New York State Comptroller Thomas DiNapoli announced his plan to bring the state’s pension programs to become net-zero.
So then begs the question of why Comptroller Stringer and Mayor Bill de Blasio are running full speed ahead with fossil fuel divestment. After all, those who have divested have come to find out it’s actually far more complex than it is made out to be on paper, plus not that effective. Moody’s, one of the world’s most respected crediting agencies, explained why the hype behind divestment is far more ineffectual than it seems.
“Divestment pledges are growing steadily, with declining investment in oil and gas from state and local governments and universities representing some $14 trillion in assets, largely through pension funds, but many of these investors have never represented significant sources of capital for oil and gas companies.”
Nonetheless, Moody’s points out that the effect that divestment has on the industry is little to none.
“Divestment alone would not halt oil and gas financing, since companies continue to seek out large-scale investors for financing needs. Oil demand will continue for many decades, regardless of when it peaks, and companies will still seek capital, even if their financing costs rise.”
Columbia University, the only Ivy League in New York City, raised some eyebrows recently with their quote-on-quote divestment announcement. The institution, which claims it currently holds no investments in oil and gas majors, decided to formally announce that it would be “divesting” from fossil fuels.
Here’s the catch: they don’t currently have any direct holdings in the fossil fuel industry.
Whether or not it’s actually possible to “divest” from an industry that was never invested in in the first place, Columbia University continues to be a hub for climate technology and climate law research. Or in other words, tangible actions that actually help the environment and reduce the carbon footprint from human activity in partnership with several organizations and energy companies alike.
It’s clear that Mayor Bill de Blasio and Comptroller Stringer continue to ignore what financial experts, and even their peers, have agreed upon as the best strategy to address climate change. Today’s announcement was a win for politicians, not the climate. If politicians want to make an impact on the climate and reduce carbon emissions, they should look to funding the engineers and researchers who are developing clean energy technologies, rather than winning headlines.