BILL NUMBER:S5873

TITLE OF BILL:  An act to amend the retirement and social security
law, in relation to limitations on investments of public pension funds

PURPOSE:  To direct the State Comptroller to divest the New York State
Common Retirement Fund from companies engaged in the production of
fossil fuels.

SUMMARY OF PROVISIONS: Section 1: Names the bill.

Section 3a: Amends the Retirement and Social Security Law to prohibit
the State Comptroller from investing monies of the Common Retirement
Fund in of the top 200 companies that hold the largest carbon content
fossil fuel reserves. Divestment from coal companies must be completed
within one year; divestment from all other fossil fuel companies must
be completed by January 1, 2020.

Section 3b: Permits the Comptroller to cease divestment or reinvest in
previously divested companies if he/she can demonstrate that as a
direct result of such divestment the Fund has become or shall become:
(i) equal to or less than 99.5 per cent; or (ii) 100 per cent less 50
basis points of the hypothetical value of all assets under management
by, or on behalf of, the Fund assuming no divestment from any company
had occurred.

              

Section 3c: Requires the Comptroller to identify all companies subject
to divestment in which the Fund has holdings, and to report annually
on the progress of divestment.

JUSTIFICATION:  Climate change is a real and serious threat to the
health, welfare and prosperity of all New Yorkers. Maintaining the
status quo of fossil fuel energy production will unquestionably lead
to a self-created catastrophe. Therefore the State of New York has a
responsibility to take steps to avert this disastrous result.
Divesting the New York State Common Retirement Fund from all
investments in fossil fuels, as mandated by this legislation, is far
from a silver bullet, but it is one important step among many
necessary to move our climate away from the precipice.

The consensus of the international scientific community is that
climate change will lead to rising sea levels, increasingly intense
storm events and droughts, as well as threats to global water and food
supplies and loss of critical biodiversity, threatening lives,
livelihoods and the integrity of our society. Among the risks New York
faces are:

*Harm to human health and safety

*Increasing healthcare costs

*Increasing costs to municipalities and local governments

*Higher insurance costs

*Loss of property value


*Contamination of water and soil

*Deforestation

*Loss of wetlands

*Losses to agriculture, fisheries, and tourism

*Destruction of homes and displacement of families and communities

The 2009 Copenhagen Accords stated that an increase in global average
temperature of more than 2Ö C would lead to an unsafe risk of
irreversible climate change. In order to stay below 2Ö C, there is a
limit to the amount of carbon dioxide emissions that can be released
globally through the burning of fossil fuels - 886 Gigatons between
the years 2000 and 2050. 321 Gt have been burned from 2000 to 2010,
leaving a remaining carbon budget of approximately 565 Gt. Currently
proven fossil fuel reserves belonging to private and public companies
total an overwhelming 2,795 Gt of potential emissions, not including
as-yet undiscovered reserves that fossil fuel companies spend billions
of dollars each year to find. This means that in order to avoid
causing catastrophic climate change, at least 80% of all current
proven coal reserves, half of gas reserves and one third of oil
reserves must stay in the ground.

The State Common Retirement Fund, with an estimated value of over $180
billion, invests at least $5.12 billion in public pension money in
companies that mine, drill and produce fossil fuels. The CRF is one of
the largest and most visible institutional investors in the world.  By
divesting from fossil fuels, the CRF will send a message that it is
unacceptable for any institution to profit from activities that
threaten the future of our society, and will begin the process of
delegitimizing a business model that, while financially profitable in
the short run, is socially and morally bankrupt. As a state we cannot
commit to the steps necessary to prevent climate change while
maintaining a financial interest in companies whose profits depend on
the continuation of practices that cause climate change. As Upton
Sinclair wrote, "it is difficult to get a man to understand something
when his salary depends on his not understanding it."

The Office of the State Comptroller has made a significant effort to
use stockholder engagement to influence the actions of
climate-damaging fossil fuel companies. However, these companies have
largely ignored entreaties from OSC and other institutional investors,
played down the threat posed by climate change, and scoffed at the
possibility of changing their way of doing business.  In the end, the
profitability of fossil fuel companies is based solely on their
ability to supply far more carbon than the atmosphere can safely
absorb, a business plan that is at odds with physical reality, making
stockholder engagement a futile endeavor and demonstrating the
necessity of divestment.

Divestment is wholly in accord with the state's fiduciary
responsibility to protect the value of the pension fund. Numerous
business, financial and government leaders worldwide have warned that
investing in fossil fuel companies undermines the soundness of
investment portfolios, including the governor of the Bank of England,


Mark Camey; the President of the World Bank, Jim Yong Kim; and former
Treasury Secretary Henry Paulson. Given the growing understanding of
the reality of climate change and the increasing likelihood of
national and international action to reduce fossil fuel use, companies
whose value is based on unburnable carbon reserves risk rapid
devaluation as a result of these stranded assets. A prudent fiduciary
must also take into account the broader risk of economic and market
disruption posed by climate change, the evidence of which has already
been seen in the aftermath of Superstorm Sandy and other extreme
weather events. To further address concerns about meeting fiduciary
obligations, this bill contains a financial safety valve that would
permit the Comptroller to cease and/or reverse divestment if he or she
can demonstrate significant loss of value to the CRF as a direct
result of divestment.

This bill provides a five-year horizon for completion of divestment
from all fossil fuels (including coal, oil, and natural gas) in order
to maximize flexibility and minimize financial risk. However,
divestment from the coal industry in particular is an urgent financial
and environmental necessity, and it is therefore specially mandated to
occur within one year. The CRF has already lost over $100 million
through coal investments in the past three years at a time of
generally strong market growth, and those investments are not likely
to recover. Coal is one of the dirtiest, most carbon intensive sources
of energy, emitting more carbon dioxide per unit of energy produced
than oil or gas. Recent analyses have found that over 80% of worldwide
coal reserves, including 90% of US reserves, must stay in the ground
in order to stay below the 2Ö C limit.

In taking the responsible step of divesting from fossil fuels, New
York would take a leading role in a global movement that includes more
than 160 institutions and local governments, including The New School,
and Stanford and Syracuse Universities; the cities of Seattle, San
Francisco, Portland, Minneapolis, and Ithaca; the World Council of
Churches, and the United Methodist Church USA; Guardian Media Group
and the Rockefeller Brothers Fund; and the sovereign wealth fund of
Norway.

Divestment is financially prudent, morally imperative, responsible
policymaking, and the time for action is now.

FISCAL IMPLICATIONS: Undetermined

EFFECTIVE DATE:  This act shall take effect immediately.