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State-Held Stocks Go Green

Thu, 12/17/2020 - 11:17

New York State Comptroller Thomas DiNapoli announced last week that the state's $226 billion Common Retirement Fund will transition its portfolio to net-zero greenhouse gas emissions by 2040.

A review of investments in energy sector companies is to be completed within four years, using minimum standards to assess transition readiness and climate-related investment risk.

"On the eve of the fifth anniversary of the Paris Agreement," the landmark agreement between almost every nation that aims to limit the increase in global average temperature to 1.5 degrees Celsius above pre-industrial levels, "as the world increasingly moves toward net-zero emissions targets by or before 2050, this goal will continue to ensure the fund's portfolio is adapting to the anticipated transition," said a Dec. 9 statement from the comptroller.

"New York State's pension fund is at the leading edge of investors addressing climate risk, because investing for the low-carbon future is essential to protect the fund's long-term value," Mr. DiNapoli said in that statement. "Achieving net-zero carbon emissions by 2040 will put the fund in a strong position for the future mapped out in the Paris Agreement. We continue to assess energy-sector companies in our portfolio for their future ability to provide investment returns in light of the global consensus on climate change. Those that fail to meet our minimum standards may be removed from our portfolio."

The fund is now concluding an evaluation of nine oil companies and will develop minimum standards for investments in shale oil and gas. Those will be followed by integrated oil and gas; other oil and gas exploration and production; oil and gas equipment and services, and oil and gas storage and transportation.

Minimum standards for all these sectors, and a determination of which companies can remain in the fund's portfolio, are to be completed by 2025. After initial reviews, the state will continue to reassess whether the remaining companies are meeting minimum standards and are on viable low-carbon paths.

Councilwoman Kathee Burke-Gonzalez brought the announcement to her town board colleagues' attention on Tuesday. The town board heard a presentation on the Climate Leadership and Community Protection Act last week, a plan to curtail fossil fuel emissions signed by Gov. Andrew M. Cuomo last year.

"This means that New York State just became the largest pension fund in the world to take comprehensive climate action, including fossil-fuel divestment," Ms. Burke-Gonzalez said.

The retirement fund's transition to net-zero emissions will also "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," Ms. Burke-Gonzalez said.

Mr. DiNapoli's announcement "sets a high bar in a vital year for climate action," she added. "The New York State Common Retirement Fund is the third-largest pension fund in the country, and when it takes action, people pay attention." It will send a message, she said, "that the era of dirty fossil fuels must and will come to an end, and the smart money is getting out sooner rather than later."

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