Divest vs. Engage & Invest? The Fossil Fuel Debate in New York State

The relationship between our pension funds and fossil fuel companies has become a heated topic of discussion with two differing philosophies on how to approach the issue. Right now New York City has $5 billion of its $191 billion of its pension fund invested in fossil fuel companies. New York State’s $200 billion pension fund currently has $3.68 billion invested in the top 200 fossil-fuel companies. In financial terms, the New York State retirement fund and the New York City pension fund are the third and fourth-largest funds in the country, and wield tremendous power. Here is a quick breakdown of the two major points of view:

Stakeholder Engagement and Sustainable Investments: “Have the money we need, and do the right thing on the climate issue.”

Over the past decade, NYS Comptroller Tom DiNapoli has used his voice and shareholder voting power to compel companies to address climate change risks they face, to report on and reduce their greenhouse gas (GHG) emissions and to acknowledge their business opportunities and risks in the emerging low carbon economy. Over the last decade, the NYS Pension Fund has filed more than 120 climate change-related shareholder resolutions and reached 43 agreements with portfolio companies, persuaded 70 companies to disclose their carbon emissions data over the last two years and most famously won broad shareholder support for ExxonMobil, Duke Energy and others to agree to examine how the worldwide effort to meet the goals of the Paris Agreement will impact their businesses. At the same time, DiNapoli has committed $7 billion of the fund’s money to sustainable investments including $4 billion for the low emissions index and $3 billion in sustainable investments across asset classes.

Divestment: “An extraordinary opportunity to send a clear message.”

For those in favor of pure divestment, a position that NYC Comptroller Scott Stringer has adopted after supporting stakeholder engagement for a number of years, the belief is withholding investment funds holds fossil fuel companies to account. New York City Mayor Bill De Blasio recently sued the Big Five oil companies by alleging the corporations’ played a role in causing Hurricane Sandy by contributing to climate change. Furthermore, the suit came with a promise of $5 billion in divestment by 2022. As a socially responsible investor, New York City has already divested from coal (as California has already) and private prisons — a signal that these organizations have no long-term future. This time, the companies, and fiduciary stakes, are much bigger. Stringer already has two of five funds supporting his divestment strategy. The question remains: how much will the divestment, if implemented, push fossil fuel companies toward renewable energy?