Written by Reid Capalino, Capalino+Company’s Director of Sustainability
Emphasizing New York City as a “global leader on climate change,” Mayor de Blasio this week proposed that the City’s five pension funds divest coal holdings and devise an investment strategy to account for long-term risks of fossil-fuel investments.
Thermal coal investments currently account for less than 0.02% of the $160 billion in combined assets held by the City’s pension funds. That said, divestment from coal would nonetheless be a significant recognition of the financial risks associated with fossil-fuel investments amid increasingly urgent efforts to reduce greenhouse gas emissions.
Should the City funds adopt the Mayor’s proposal, New York City would join a coalition of over 436 institutions (representing over $2.6 trillion in assets) that over the past two years have divested at least a portion of fossil fuel holdings.
The Mayor’s announcement on Tuesday came two days after Councilmembers Rosenthal and Constantinides sent a letter to trustees of the City’s pension funds five funds to “open a discussion about the financial performance – and associated risks – of the fossil fuel investments in our City’s pension funds.” Among other things, the Councilmembers inquired how current investment strategies are accounting for “the long-term devaluation of fossil fuel companies” and whether modifications to such holdings, “including but not limited to phased divestment,” might improve pension fund returns. Presumably these are questions that trustees of the City’s pension funds will be grappling with in the months ahead as they seek to integrate climate-related analysis into investment decisions.
Comptroller Scott Stringer and others have already helped the City pension funds to emerge as leaders in addressing financial risks related to climate change. As part of the Boardroom Accountability Project the Comptroller’s office recently filed shareholder resolutions with 33 fossil fuel companies seeking to give investors a more active role in nominating corporate directors.
The majority of these resolutions passed, which will strengthen the potential for the City’s funds to engage frankly with fossil fuel companies on the need to incorporate climate considerations into corporate strategy.
For more on this topic, see the items below from Capalino+Company’s Director of Sustainability Reid Capalino, who has written and spoken extensively on fossil fuel divestment and other financial considerations related to climate change.
- “King Coal” disappoints investors: recent financial trends in global coal mining
- Video of September 2014 talk at Bloomberg LP on financial risks related to thermal coal
- Video of August 2015 350NYC Panel on “Financial strategies to keep fossil fuels in the ground”
- Video of May 2015 talk at The New School on the fossil fuel divestment movement
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