Fossil fuel holdings weigh on US state pension funds

A new report from Corporate Knights, an investment research company, states that remaining in fossil fuel investments cost the New York State Common Retirement Fund (NYS-CRF) at least $5.3bn over the last three years, as it continued to hold positions in over 30 of the top 200 dirtiest fossil fuel companies. Several other US state-based pension funds found themselves in the same position. “The era of fossil fuels is coming to an end, and this report demonstrates very clearly why divestment is not only environmentally sound, but financially responsible,” said New York State Senator Liz Krueger, co-sponsor of the Fossil Fuel Divestment Act.

The New York State Common Retirement Fund lost at least $5.3 billion over the last three years by remaining invested in fossil fuel holdings.

These are the findings according to a new report from Corporate Knights, an investment research company, and publicised by grassroots global climate campaign 350.org. Specifically, the report concluded that the New York State Common Retirement Fund (NYS-CRF) joined several other US state-based pension funds in losing billions by remaining invested in the top 200 coal, oil, and gas companies over the past three years. According to Corporate Knights, by remaining invested in over 30 companies from the top 200 dirtiest fossil fuel companies, instead of reinvesting in green companies, the NYS-CRF lost out on $5.3 billion.

“The era of fossil fuels is coming to an end, and this report demonstrates very clearly why divestment is not only environmentally sound, but financially responsible,” said New York State Senator Liz Krueger, co-sponsor of the Fossil Fuel Divestment Act. “By staying invested in fossil fuels over the last three years our state pension fund missed out on over $5 billion in potential returns. Investment in fossil fuels is a sinking ship, and it’s high time we headed for the lifeboats.”

350.org put that figure into a frightening example: $5.3 billion represents what could have been $4,500 back into the pockets of each of the Fund’s 1.1 million members.

“Our analysis with the Decarbonizer suggests the New York State Common Retirement Fund’s equity portfolio would have been at least $5.3 billion better off had it divested from the biggest oil, gas and coal companies three years ago in favour of companies providing climate solutions,” said Toby Heaps, CEO of Corporate Knights. “This number is a conservative estimate based on the equities side of the fund. The energy transition away from old fossil fuel energy to new clean energy is underway and investors who cling to fossil fuel holdings risk substantial value destruction over the long-term.”

“New York is a rich state, but perhaps not so rich it can afford to waste billions investing in failing business models–especially when the warming caused by those companies will cost a fortune to deal with!,” said Bill McKibben, Co-Founder of 350.org. “New York has made bold moves for climate such as banning fracking and phasing out coal-fired power plants, yet the pension fund continues to invest in both of these destructive and outdated extraction practices.”

The New York State Common Retirement Fund joins a growing list of pension funds which have been focused in similar reports — including one in their own backyard.

Only last month, an analysis of publicly disclosed material conducted by investment adviser Advisor Pratners, on behalf of 350.org, discovered that the Teacher’s Retirement System of New York lost approximately $135 million due to remaining invested in oil and gas companies in fiscal-year 2015 alone. In fact, the Teacher’s fund saw a decline of more than 25% in its oil and gas stocks during the fiscal-year, thanks primarily to declines in Exxon Mobil and Chevon Corp, which represented a loss of more than $39 million on their own.

Joining New York was California’s two public pension funds — California Public Employees’ Retirement System (CalPERS) and California State Teachers’ Retirement System (CalSTRS) — which were found in August of 2015 to have lost more than $5 billion over the previous year due to their investments in the top 200 fossil fuel companies.

“This is a material loss of money, which directly impacts the strength of the pension fund,” said Matthew Patsky, CEO of Trillium Asset Management, the agency who conducted the analysis. “Fossil fuel stocks are volatile investments. Investors and fiduciaries should take this moment to reassess their financial involvement in carbon pollution, climate disruption and the financial risk fossil fuels plays in their portfolio.”

Across the Pond, figures published in October of 2015 suggested UK local council pension funds had lost up to £683 million (or around $1.05 billion USD) due to their own failed investments in coal. According to new calculations by Platform London, and released in conjunction with 350.org, Friends of the Earth, and Community Reinvest, failed investments in coal firms caused by the recent coal crash cost UK local council pension funds up to £683 million, with Greater Manchester’s interests in coal crashing by £148 million.

Despite the losses being incurred by so many, fossil fuel divestment numbers and commitments continue to increase. Early December, 350.org published its most recent tally of fossil fuel divestments, revealing that more than 500 institutions from around the globe have committed to divest from fossil fuels, totalling over $3.4 trillion. That was a tremendous growth rate from only September, which had seen 430 institutions committing to divest $2.6 trillion.

“The logic of the divestment movement is quite simple: if it’s wrong to cause climate change, it’s wrong to profit from climate change,” said 350.org Executive Director May Boeve. “The diversity of actors involved, such as faith groups, cities, universities show that the movement is wide and has injected itself into the life of different institutions which do not want to be associated with this industry.”

Image: Coal smokestack via Shutterstock

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