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July 28, 2020

DiNapoli Discusses Why Sound Investing Strategies Are Preferable to Divestment

New York State Comptroller Tom DiNapoli, ran an opinion piece in the Albany Union Times recently, defending the State’s pension fund investment strategy and why “solely divestment” is not an option. DiNapoli has been under siege by “divest now” proponents and climate activists who demand that the Comptroller immediately liquidate all fossil fuel-related investments, without understanding the intricacies of what divestment entails.

Last week, DiNapoli came back for round two. In a candid radio interview with WXII AM News, DiNapoli expanded upon his anti-divestment position, shedding more light on the decision-making process that goes on in one of the nation’s largest and well-funded pension funds. But most importantly, he rebuked divestment activists’ most salient claims, which usually are of the political and symbolic variety, with solid fact-based arguments. DiNapoli explained why maintaining the highest standards and complying with his “fiduciary responsibility” is the best practice to continue addressing climate change concerns.

Here are some of the expanded arguments and quotes by DiNapoli on why divestment, ultimately, is neither the only, nor the best alternative, when it comes to responsibly managing assets:

Pension funds have a direct, “fiduciary responsibility” that cannot fall prey to political whims

“We are a pension fund. We are set out to invest the money that’s contributed by public employees and by government employers, to invest that money to provide retirement security. […] So the strength and the investment strategies that are brought to bear are very key part of what makes for the pension, and a very key part of what, we can show, the pension system is still sustainable from an affordability point of view, because if we don’t make our mark, then taxpayers get paid less.”

Pension funds follow strict, expert investment protocols; investment decisions are not cherry-picked

“We have a professional investment staff, we have consultants and advisors that guide us, we have advisory committees of professionals. So, there’s a very established and elaborate process. But what’s important as far as talking about this question [divestment], I think there is a misconception out there that we are picking stocks to making a bet on fossil fuel companies or on airlines or on cereal companies. But that’s not that’s not how we do the investment of public equities.”

Divestment, a political and ill-informed decision, poses a fiduciary threat to the fund

“We’re not totally unmindful of the fact that there may be times where we need to deviate from the index. When we deviate from the index, that has to be part of not a political process but a thoughtful investment process where we do an economic analysis, we get sign off from fiduciary counsel, that if we are deviating from, what is our standard practice, we’re not going to do anything to harm the funds.”

Divestment is not the answer to climate change. But engagement is.

“The risks of climate change, greenhouse gas emissions, controlling them and reducing them is not a question of selling stocks on fossil fuel companies. Every, every entity, organization, corporate sector, we all must be part of that conversation.”