Pen­sion sys­tem weigh­ing port­fo­lio’s car­bon foot­print

Fund man­agers want to min­i­mize im­pact on en­vi­ron­ment of in­vest­ments

Baltimore Sun - - NEWS - By Scott Dance sdance@balt­sun.com twit­ter.com/ss­dance

“If it’s a risk to the sys­tem, we need to think of it like any other risk and in­cor­po­rate it through­out our en­tire process.”

The man­agers of Mary­land’s pen­sion fund have be­gun con­sid­er­ing the ef­fect their in­vest­ments have on cli­mate change and how to min­i­mize the car­bon foot­print of the state’s $45 bil­lion port­fo­lio.

The state’s chief in­vest­ment of­fi­cer told law­mak­ers Wed­nes­day that the pen­sion sys­tem is weigh­ing how ef­forts to re­duce green­house gas emis­sions could lower the value of some of its in­vest­ments, and how to shift more money to en­vi­ron­men­tally friendly in­dus­tries, such as re­new­able en­ergy.

Mem­bers of the Gen­eral Assembly re­quested the brief­ing as large in­vestors around the coun­try are in­creas­ingly sell­ing as­sets linked to fos­sil fu­els and urg­ing com­pa­nies to re­duce emis­sions.

The pen­sion sys­tem cov­ers state and lo­cal govern­ment em­ploy­ees, po­lice, teach­ers and judges.

Sys­tem of­fi­cials have not changed their in­vest­ment strat­egy, said An­drew Palmer, who over­sees the port­fo­lio. But they’re in­cor­po­rat­ing more ques­tions about cli­mate change im­pact into their de­ci­sion mak­ing.

“If it’s a risk to the sys­tem, we need to think of it like any other risk and in­cor­po­rate it through­out our en­tire process,” he told the Joint Com­mit­tee on Pen­sions, which over­sees the sys­tem.

Palmer said pen­sion trus­tees are study­ing the ways cli­mate change can af­fect in­vest­ments. He said they must con­sider both how fed­eral and in­ter­na­tional ef­forts to re­duce car­bon emis­sions might re­duce the value of as­sets linked to oil, coal or heavy man­u­fac­tur­ing, for ex­am­ple, and also what po­ten­tial might lie in tech­nolo­gies that will be nec­es­sary “to trans­form to a low-car­bon world.”

State Trea­surer Nancy K. Kopp said it can be dif­fi­cult to gauge an in­vest­ment’s car­bon foot­print be­cause com­pa­nies are in­con­sis­tent in the amount and de­tail of in­for­ma­tion they pub­licly re­lease.

Kopp is in­volved in na­tional ef­forts to es­tab­lish stan­dards for cor­po­rate dis­clo­sure of en­vi­ron­men­tal im­pacts.

“Without that, it’s very hard to do much of any­thing as far as know­ing what to in­vest or not in­vest in,” she said.

The task is ex­pected to get eas­ier as more large in­vestors be­gin con­sid­er­ing cli­mate change, said Nick Ashburn, se­nior di­rec­tor of im­pact in­vest­ing at the Whar­ton So­cial Im­pact Ini­tia­tive at the Univer­sity of Penn­syl­va­nia.

Ashburn said uni­ver­si­ties, pres­sured by stu­dents, and wealthy in­di­vid­u­als with a sense of so­cial re­spon­si­bil­ity were among the first to pri­or­i­tize en­vi­ron­men­tally conscious in­vest­ing. But in­creas­ingly, large in­vestors such as pen­sion funds are rais­ing the same ques­tions, plac­ing more pres­sure on com­pa­nies to ex­plain in more de­tail how they af­fect the en­vi­ron­ment.

United Na­tions Sec­re­tary Gen­eral Ban Ki-moon in 2014 called on pen­sion funds to cut in­vest­ments in oil com­pa­nies and back re­new­able en­ergy ven­tures in­stead.

Cal­i­for­nia law­mak­ers last year re­quired the state’s pen­sion sys­tems to di­vest coal-re­lated in­vest­ments. Cities in­clud­ing Seat­tle, Oak­land and Minneapolis also have taken steps to sell off as­sets tied to

An­drew Palmer, who over­sees pen­sion fund

fos­sil fu­els. And since 2012, more than 500 uni­ver­si­ties around the world have shed fos­sil fuel stocks.

Other large in­vestors are fo­cus­ing on pro­mot­ing change, rather than pulling their money out al­to­gether. Cal­i­for­nia’s pen­sion sys­tem re­cently launched a push for com­pa­nies in its port­fo­lio to add cli­mate change risk ex­perts to their boards of di­rec­tors, for ex­am­ple.

New York state Comptroller Thomas P. DiNapoli in Au­gust an­nounced agree­ments with com­pa­nies in the state re­tire­ment fund’s port­fo­lio, in­clud­ing re­tail­ers Best Buy and Nord­strom and en­ergy pro­duc­ers Al­lete and North­West­ern En­ergy, to ex­plore low-car­bon and re­new­able en­ergy sources. The state is among many ExxonMo­bil in­vestors push­ing the en­ergy gi­ant to re­duce its car­bon foot­print.

Palmer said the Mary­land sys­tem is ex­plor­ing how it can ex­ert sim­i­lar pres­sure on com­pa­nies in its port­fo­lio, but lim­ited re­sources make it dif­fi­cult.

Cal­i­for­nia has a $3 mil­lion bud­get for staff ded­i­cated to en­vi­ron­men­tally and so­cially conscious in­vest­ment de­ci­sions, he said. That’s half of Mary­land’s en­tire bud­get for man­ag­ing pen­sion in­vest­ments.

ALGERINA PERNA/BAL­TI­MORE SUN

Cop­pin State Univer­sity bas­ket­ball player Keith Shivers runs around the block on Wed­nes­day with, from left, Fiona D’An­drea, Olivia Cromin and Poppy McDon­ald, all pupils at Mount Wash­ing­ton Ele­men­tary/Mid­dle School. The Cop­pin men’s bas­ket­ball team and women’s track and field team vis­ited the school.

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