History of the 350NYC State and City Divestment Campaign

“While early on in the divestment movement, pension funds were not significantly represented, today legal and financial analysts acknowledge that standards of ordinary prudence, a fiduciary obligation frequently cited as a deterrent of divestment, may actually require divestment from fossil fuels.”
– Bill Lipton

 

New York State:

New York State’s Common Retirement Fund – with more than $175B in assets – is the third largest pension fund in the country, just behind California’s CalPERS and CalPERS. In 2015, NYS had $5 billion, 3% of its total fund, invested in the top 200 fossil fuel companies: Exxon is NYS’ third largest company holding.

The fund is wholly controlled by State Comptroller Tom DiNapoli, an elected official. Comptroller DiNapoli prefers remaining invested in fossil fuel companies and attempting to engage their boards to act on climate despite engagement having no track record of success on climate.  A March 2016 report found that the NYSCRF lost $5.3 billion from its holdings in fossil fuel companies. That loss would have made each of the fund’s 1.1 million members more than $4,500 richer, and could have helped the state cover nearly 12% of the costs following Superstorm Sandy.  

The power analysis is more complicated at the City level, where the pension system is comprised of five discrete pension funds representing a total of $170.8 billion. New York City Comptroller Scott Stringer – an elected official – manages the pension funds staff including the Chief Investment Officer. Each pension board has a different makeup, composed of teachers, city worker union representatives, NY City Mayor Bill de Blasio and NYC borough presidents. Stringer sits on 4 of the 5 boards. Stringer often cites his lack of unilateral decision-making authority to rebuff calls to divest. Yet he clearly has substantial clout and persuasive power to move the pension boards, if he would so choose.

Led by 350 NYC, the NY state and city pension fund campaigns have been ongoing since 2013. Key targets of the campaign are the State and City Comptrollers with oversight over the funds, Tom DiNapoli and Scott Stringer, respectively. One of our earliest campaign events was a rally and petition delivery to State Comptroller’s office in Manhattan in March 2014. Messaging was grounded in the stranded assets and carbon bubble hypothesis, and how pensions – with their longer investment horizons & legal duty to protect assets for current and future beneficiaries – were especially vulnerable to the changing financial and policy landscape.

Campaign tactics are rooted in regular organizing meetings by 350 NYC divestment working group, public protest, presentations at city council meetings, lobby days at the state legislature in Albany, and, crucially, coalition-building with key elected in both NYC council and state legislature. The campaign received a boost at the end of 2016 when 350 National made NY divestment a key strategic priority, helping launch the DivestNY coalition which has brought together diverse stakeholders from the DivestInvest network and other local activist groups. In May 2017, campaigners pulled out all the stops for global divestment week – organizing a well-attended divestment ‘teach-in’ at Trump Tower as well as a Lobby Day and press conference in Albany featuring state legislative sponsors of the Fossil Fuel Divestment Act, which campaigners helped draft in 2015. Pressed for comment for the multiple news stories that emerged, DiNapoli and Stringer both took defensive positions, noting all that they have done and are doing to manage climate risk in the pension portfolios.

At the state level, Comptroller Tom DiNapoli holds full authority over the state funds so we initially sought to pressure him directly with in-person meetings with his staff and public events at his offices. He has, however, held firm in his opposition to divestment saying as recently as this month – through a spokesperson – that “The divestment movement is too simple a way to try to attack a very complex problem. It’s “unrealistic” to think that if the pension fund were to sell all of its shares in a company like Exxon Mobil that the corporation would substantially change its ways or go out of business. … It’s better that we have a seat at the table as a shareholder.”

As a result, campaigners have increasingly sought to influence him by other means. Among them is an effort to pass divestment legislation in the NY State Legislature. The Fossil Fuel Divestment Act (drafted by campaigners) was first introduced in 2015, which would require the fund to divest from the top 200 fossil fuel companies. The bill’s lead sponsors are State Sen. Liz Kreuger and State Assemblyman Felix Ortiz. Last year, the bill was passed out of committee in the senate, which was a nominal victory but it was stalled when the next level of review – the Finance Committee – declined to take it up. Given the slim GOP-majority in the state senate, the bill is unlikely to pass. Nevertheless, campaigners remain focused on building support for the bill by as many state legislators as possible, to send a signal to DiNapoli.

One intriguing development may shift the balance in the Senate this year and could open the door to the more serious consideration of the divestment bill. Currently the 63-member body is comprised of 32 Republicans (one of those is actually a Democrat who votes with the Republican block) and 31 Democrats. However, one GOP lawmaker is currently under investigation on corruption charges. If he is ousted, the balance of power will tip.

City divestment work has been more fruitful, and has been proceeding on several fronts. Because the five pension boards have closed sessions, there was no direct route to influence them through public comment – aside from keeping the press on Scott Stringer and bird-dogging board members. As a result, campaigners initially focused on New York City council members that could influence the process politically and from a public relations perspective (they lack legal authority over the funds).

In 2014, we drafted a resolution and lined up support from several city councilmembers. Ultimately the resolution was not introduced and attention was turned to a bill that would order the pension funds to undertake a study of their fossil fuel exposure. There was initial support by City Councilwoman Helen Rosenthal, who went so far as to secure additional cosponsors, but she ultimately back down in the face of public pressure from Comptroller Stringer. Attempts to pressure Mayor De Blasio, who also sits on the pensions’ boards, up to this point (mid-2014) were also unsuccessful.

Subsequently, however, the Peoples climate March in 2014 and the Pope’s visit to NY in 2015 put new wind in De Blasio’s sails on divestment. On Sept 29, 2015 he announced he would be submitting a resolution to all 5 city funds asking then to divest from coal and to further review all fossil fuel investments. Pressure by the Mayor subsequently led Stringer to back the resolution on December 2015. He said: “A pending resolution to divest from coal is now before us. And I can tell you that my vote will be to divest. It’s not just the smart thing to do from a fiduciary point of view, it’s the right thing for our planet, for our children and, yes, for our retirees.” At least two of the five city pension funds (teachers and NYC workers) have since divested from coal.

Since that time, and despite ongoing pressure from campaigners, both Stringer and DeBlasio have failed to endorse full fossil fuel divestment. The DivestInvest coalition invited him to speak at our annual press conference last year – calling on him to endorse full divestment as a counter and contrast to the Trump administration’s climate denialism. The Mayor ultimately decided it was not the political moment to so.  that and since then he and stringer have been quiet on hold us back. There is a new moment to pressure the Mayor as he faces reelection this year (though largely expected to be largely a cakewalk).

Also per the Mayor’s 2015 resolution, Stringer agreed to undertake the study of the pension funds’ exposure to all fossil fuels. The report was initially expected in March of this year but Stringer has only just recently hired the firm to undertake the study — now likely due in September. The controller is now relatively insulated from the activist pressure because he says he must wait for the study results to come through. As early as last week, he has reiterated his view that across-the-board divestment would be fiscally irresponsible without further study showing it won’t hurt pensioners. His team is clearly in the defensive, however, furiously touting his other policies to reduce climate risk: “Here’s what these folks aren’t telling you: Scott Stringer has one of the strongest environmental records around,” Comptroller’s Office spokesman Jack Sterne said in a statement. “From being one of the first to fight against fracking nationwide, to working with comptrollers and treasurers across America to support the Paris Agreement, to fighting against climate deniers and pushing for climate competent corporate boards, Comptroller Stringer has gotten real results.”

Perhaps the gentleman doth protest too much? Activist will keep up the heat this year as we head into the election season, keeping pressure on De Blasio and Stringer on full fossil fuel divestment.

Finally, a recent development with application to both City and State funds. Both Stringer and DiNapoli have pushed hard on shareholder activism with fossil fuel companies. Just last week, a resolution to disclose climate risk passed at the Occidental Petroleum AGM. It was led by the giant CA pension fund CalPRS but the decisive vote was Black Rock, which has opposed similar resolutions in the past. DiNapoli has put a similar resolution forth for Exxon’s upcoming AGM, calling for increased disclosures about the risks climate poses to Exxon’s business. If this passes, DiNapoli will be able to point to a very concrete victory that he will potentially use to dig in his heels against divestment. Campaigners will have to decide how to respond – e.g.. a victory lap and back-slapping for the Comptroller or renewed energy on calls to divest. Given Exxon’s history of talking a good game on climate while investing in ever-new reserves beyond those we can’t burn – it remains unclear what impact increased climate risk disclosures would have in any case. It already insists current disclosures are adequate, not surprising given it keeps betting heavily on fossil fuels. It has invested $7B to develop low-carbon solutions over the past 15 years, just slightly more than it spent on acquisition last quarter to buy land in the Permian Basin.

Written by By Clara Vondrich, Director Divest/Invest Philanthropy  (and previously a 350NYC steering committee member)

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