Dunlea Says It’s Time for NYS Pension Fund to Divest $6 Billion from Fossil Fuel Industry, Citing New Study that Shows Fossil Fuels Are a Risky Investment
A new study co-authored by Tom Sanzillo, former Acting NYS Comptroller, makes the case that fossil fuels are an increasingly risky financial investment and that a prudent financial manager would divest fossil fuels from the institutional funds he or she oversees.
Green Party Comptroller candidate Mark Dunlea, a longtime advocate for fossil fuel divestment, says the study’s results are further evidence that New York State should divest the $6 billion it has invested in the fossil fuel industry from the state pension fund.
Current NYS Comptroller Tom DiNapoli, appointed by state lawmakers to replace Alan Hevesi after the latter was forced to resign, has consistently rejected such advice. DiNapoli instead claims that engaging in shareholder advocacy with the fossil fuel companies will lead them to take action on climate change and protect the state’s investments. DiNapoli, however, is ignoring a half-century of failed efforts by investors to use their stock voting rights to change the behavior of companies. DiNapoli did get Exxon to put out a report on climate risk this year that was widely regarded as worthless; DiNapoli described it as “inadequate.”
“When we started the divestment campaign five years ago, the main point was that funds like the NYS pension fund should not be seeking to profit from fossil fuel companies that were driving climate change and threatening humanity’s future well-being. Why should New York invest in companies that were going to drown New York City and wreak havoc statewide with extreme weather? But now the question is also whether we will elect a State Comptroller who will protect our pension funds by divesting from fossil fuel companies while the stocks still have some value,” said Dunlea.
The study – “Divestment from Fossil Fuels: The Financial Case,” by the Institute for Energy Economics and Financial Analysis – was issued in response to a request for information by managers of New York City’s pension funds, who are seeking to divest from fossil fuels. Since 350.org launched the divestment campaign five years ago, 700 institutions worldwide with more than $6 trillion in investments have agreed to divest from fossil fuel companies.
The study points out that “for the past five years, the energy sector has lagged almost every other industry on the world market. Instead of bolstering portfolio returns, energy stocks dragged them down and investors lost billions.”
Even with oil prices more than doubling in the last two years, fossil fuel companies have underperformed compared to the rest of the market, the study’s authors continue: “Fossil fuel stocks, once prime blue chip contributors to institutional funds, are now increasingly more speculative. Revenues are volatile, growth opportunities are limited, and the outlook is decidedly negative. The trend toward lower energy costs and more energy and technological innovation tilts away from fossil fuel investment that is largely inflationary, volatile, and disruptive to national economic growth strategies.
“The world economy is shifting toward less energy-intensive models of growth, fracking has driven down commodity and energy costs and prices, and renewable energy and electric vehicles are gaining market share. Litigation on climate change and other environmental issues is expanding and campaigns in opposition to fossil fuels have matured…. The risks, taken cumulatively, suggest that the investment thesis advanced by the coal, oil and gas sector that worked for decades has lost its validity.”
Dunlea added that “we need a State Comptroller who is willing to both be a climate leader and who isn’t beholden to the fossil dinosaurs who control the investment industry. So far Tom DiNapoli has been far too timid to protect the interests of New York’s retirees and taxpayers.”
The report says that going forward, fund managers should “look to maximize returns by allocating capital to those segments of the market that are growing. It should not be difficult to find alternatives to oil and gas stocks given their lagging sector wide performance. Investment opportunities that meet the financial targets of institutional funds abound.”