We, the undersigned elected officials, are committed to protecting the economies, environment, and public health of the New York State cities, counties, towns, and villages we represent. While we appreciate your work on a low carbon investment index and the Sustainable Investment Program, we recognize these are only the first steps towards fully addressing the risk of climate change in our State’s pension fund. The urgent timeline for addressing climate change and securing the pension fund requires a firm commitment to rapidly shift investments away from fossil fuels.
Climate change is a serious and urgent threat to the health, welfare, and prosperity of all New Yorkers. New Yorkers have experienced the tragic impacts of climate change, including Superstorm Sandy and Tropical Storms Irene and Lee; the cost of Superstorm Sandy alone to New York State was $32.8 billion. We have witnessed the losses to our communities, businesses, and agriculture due to extreme weather, infrastructure damage, displacement of residents, and threatened food and water supplies, while taxpayers in our municipalities pay billions to rebuild and adapt.
The consensus of the international scientific community is that climate change is accelerating, raising sea levels, increasing extreme weather patterns, worsening air pollution, threatening water and food supplies, causing loss of critical biodiversity, and costing lives, livelihoods, and social integrity. The science is clear that we must rapidly reduce the extraction and burning of fossil fuels to avoid catastrophic climate change: at least 80% of all current coal reserves, half of gas reserves, and one third of oil reserves must stay in the ground.
As local officials with constituents and employees who are taxpayers and beneficiaries of the New York State Common Retirement Fund, we entrust the stewardship of our pension funds to the Comptroller’s Office. The Fund currently invests approximately $5 billion of public pension money in the 200 fossil fuel companies with the largest carbon content reserves. These investments fund coal mines, gas ports, pipelines, seafloor drilling, and tar sands extraction that worsen climate change and cost our communities. In New York State alone, at least 4,000 deaths and more than $33 billion in public health costs annually are associated with the burning of fossil fuels.
New York State’s current policy to invest indefinitely in the top 200 fossil fuel companies puts our communities and pension fund at risk and is antithetical to our state’s role as a national leader on transitioning to clean energy and climate resiliency. It is inconsistent for the pension system to maintain a financial interest in companies invested heavily in practices that worsen climate change while New York State is committed to policies necessary to avoid catastrophic climate change.
As a fiduciary, you are charged to prudently invest assets in ways that maximize long-term risk-adjusted performance. Fossil fuel companies do not meet this test. Risks to investments in fossil fuel companies continue to rise dramatically as clean energy is becoming rapidly more affordable and the extraction of fossil fuels is becoming more dangerous and costly. As communities demand a transition to clean energy, as industry develops new energy efficient and clean energy technology, and as governments take binding steps to limit emissions and restrict fossil fuel burning after the historic Paris agreement, fossil fuel companies whose value is based on unburnable carbon and methane reserves risk devaluation as a result of their stranded assets. Financial leaders around the world warn that the fossil fuel asset bubble will burst and destroy enormous wealth — putting New York State’s investments, and ultimately taxpayers, at risk.
Indeed, the Common Retirement Fund has already lost more than $261 million through coal investments from 2010 to 2015 at a time of generally strong market growth. There have been 52 bankruptcies in the coal industry, including all of the largest companies. These companies have lost 100% of their value and their efforts to come out of bankruptcy are marred by a weak pricing market, continued regulatory challenges, and growing public opposition at home and around the world.
New risks to fossil fuel investments surface with each passing month, with attorneys general from New York State and 16 other states conducting ongoing investigations of potential fraud by the industry for misleading shareholders and funding public misinformation campaigns over decades to deny the threats of and their role in climate change, even as they sought to protect their own assets from its impacts.
Divestment from fossil fuel companies has been shown to be safe, prudent, and consistent with fiduciary duty. Several studies have shown that fossil fuel-free funds perform as robustly or better than funds invested in such companies. Mercer’s Investing in a Time of Climate Change report demonstrates that divestment from fossil fuel companies can reduce investment risk by reducing exposure to climate change, allow capital to flow to the low-greenhouse gas economy, and offer exposure to investments that will benefit from climate change action — protecting beneficiaries and all New Yorkers.
Therefore, we respectfully urge you to divest the Common Retirement Fund from the top 200 companies with the largest carbon content fossil fuel reserves by 2020, and begin by divesting from all companies in the thermal coal industry within one year. Coal is one of the dirtiest energy sources, in addition to costing the State of New York millions of dollars and more each day.
Furthermore, we urge the State to reinvest divested funds into climate solutions and a socially just transition to clean energy in a prudent manner consistent with your fiduciary duty. We urge you to align our investments with New York State’s policies to keep fossil fuels in the ground and support a thriving low-carbon, renewable economy.