State fund to divest from oil
Climate activists hail Dinapoli’s plan to sell off fossil fuel holdings by 2025
State Comptroller Tom Dinapoli on Wednesday said he will likely sell off many of the state’s Common Retirement Fund fossil fuel holdings by 2025 in a move that has pleased environmentalists and could potentially disrupt the oil and gas industry’s finances going forward.
“Investing for the low-carbon future is essential to protect the fund’s long-term value,” Dinapoli said in announcing the plan.
Fossil fuel firms that want to remain in the pension fund will have to meet what the comptroller says is a set of “minimum standards’’ in which companies show they can thrive in the transition to a low-carbon or carbonfree economy to fight global warming. If not, they will be sold by 2025. At $226 billion, New York state’s public employee retirement fund is among the nation’s largest, and any significant sell-off of a company’s stock by the fund could have widespread repercussions.
Dinapoli has until now resisted a large-scale divestment plan because the retirement fund’s purpose and fiduciary responsibility is to protect the pensions of the 1.1 million retirees and active public sector workers who depend on it.
That duty has historically clashed with the call by climate activists, who see divestment as a way to put pressure on the oil and gas sector, and industry in general, to get out of fossil fuels.
But on Wednesday, the comptroller said he believed companies will have to deal with climate change if they are to do well going forward, and that includes fossil fuel companies.
The change also comes as the state Legislature will enter 2021 with a supermajority of Democrats, including several members who have long called for divestment.
The comptroller’s office is finishing an evaluation of nine oil sands mining firms, which extract oil from tar sands. That’s considered one of the most harmful forms of fossil fuels.
Going forward, the office will set standards for investing in shale oil and gas firms, followed by “integrated oil and gas,” companies and firms that provide services and transportation in the fossil fuel industry.
According to the Youth Climate Leaders group, the firms that will come under scrutiny and which may be sold off in coming years include the following. For tar sands: Imperial Oil, Canadian Natural Resources, Husky Energy, Suncor Energy, MEG Energy Corp., Athabasca Oil Corporation, Cenovus Energy, Japan Petroleum Exploration and Tatneft.
Shale oil and gas companies (which also use hydrofracking) include Devon Energy, Continental Resources, QEP and Pioneer.
Integrated oil and gas companies include multinational giants like Exxon Mobil Corp., BP, Shell, Conocophillips and Chevron, as well as equipment and service firms like Schlumberger and Baker Hughes.
Dinapoli has already sold off stock in 22 coal companies.
His move was hailed by climate activists who have long called for divestment.
“New York’s announcement is the biggest leap forward worldwide on climate finance action in 2020, an otherwise bleak year for the planet,” said the Youth Climate Leaders group. “It creates the most comprehensive program of any large public fund worldwide to divest from fossil fuels, decarbonize across a massive portfolio, and put major financial pressure on public companies — from auto companies to utilities — to align their operations with the scale of climate action needed to stave off worldwide catastrophe.”
Representing youths such as high school and college students who worry about global warming, Youth Climate Leaders has sought divestment for eight years.
Dinapoli’s announcement also follows a similar decision in 2018 by the New York City pension fund.
The state fund historically has held more than $12 billion invested in fossil fuel companies, including more than $1 billion in Exxon Mobil alone.
“We are delighted to know that New York state will start divestiture from the most concerning oil and gas companies near-term and will decarbonize the entire fund by 2040,” added David Levine, president of the American Sustainable Business Council, which has also promoted divestment.
“This historic action will help send market signals that fossil fuels have had their day, and clean energy is the future for New York,” added Rich Schrader, New York Policy Director at the Natural Resources Defense Council.
Dinapoli’s move also comes as some economic analysts are offering a gloomy future outlook for oil and gas firms, given the push to cut greenhouse gases as well as the glut of cheap natural gas brought about by fracking technology.
“Big oil and gas companies are vulnerable to a long term decline,” Bard College finance professor Kathy Hipple said in November during a meeting of activists who also are pushing the state’s separate $120.5 billion Teachers Retirement System to divest.
“Big Oil,” she added, “Is not really so big anymore.”