Tag: ESG

NY Common Retirement Fund Announces New Measures to Protect State Pension Fund From Climate Risk and Invest in Climate Solutions

Mary Pat Campbell

Link: https://www.osc.ny.gov/press/releases/2024/02/ny-common-retirement-fund-announces-new-measures-protect-state-pension-fund-climate-risk-and-invest

Excerpt:

The New York State Common Retirement Fund (Fund) will restrict its investments in eight integrated oil and gas companies, including Exxon Mobil Corp., after a review of the companies’ readiness to transition to a low-carbon economy, State Comptroller Thomas P. DiNapoli, trustee of the Fund, announced today.

The evaluation of the Fund’s integrated oil and gas holdings is part of DiNapoli’s broader review of the transition readiness of energy sector investments that face significant climate risk. With today’s announcement, the Fund will be divesting its corporate bonds and actively managed public equity holdings in eight integrated oil and gas companies that it has determined are not transition-ready. In addition to Exxon, the companies to be divested and restricted in the coming months are Guanghui Energy Company Ltd., Echo Energy PLC, IOG PLC, Oil and Natural Gas Corporation Ltd, Delek Group Ltd., Dana Gas Co and Unit Corp. The value of these holdings is approximately $26.8 million as of Dec. 31, 2023.

DiNapoli also announced the Fund has met its initial goal of committing $20 billion to the Sustainable Investments and Climate Solutions program, and has set a new goal of investing $40 billion in that program by 2035. With the program, the Fund invests in sustainable investments including clean energy generation, energy storage, resource efficiency, and green infrastructure across all asset classes. As part of the expansion of this program, DiNapoli also announced the Fund would increase its climate index investments by 50% to over $10 billion over the next two years, with the longer-term goal of doubling it by 2035.

Publication Date: 15 Feb 2024

Publication Site: Office of the Comptroller of NY State

Maine Takes on Fossil Fuel Divestment. How Will It Happen?

Mary Pat Campbell

Link:https://www.governing.com/finance/maine-takes-on-fossil-fuel-divestment-how-will-it-happen?utm_campaign=Newsletter%20-%20GOV%20-%20Daily&utm_medium=email&_hsmi=219420154&_hsenc=p2ANqtz-__sPq7wAi53EzPYe16VS7ePNypi9aGJv7mpM9geXevYQuSJJtrQ4NzYGMvpkVK6vF2KYhovrJ2o-svNpgMLyuWsqbxbovsKME3Sm1RZLuiVq8ZdoE&utm_content=219420154&utm_source=hs_email

Excerpt:

Activists credit the support of Beck, Maine Rep. Maggie O’Neil and state Sen. Chloe Maxmin for making Maine the first state to require fossil fuel divestment by law.

Passed and signed by Maine’s governor in 2021, LD99 calls for the state’s permanent funds and its pension system, MainePERS, to divest from fossil fuel investments by 2026 and not reinvest going forward.

It prohibits both specific lists of publicly traded companies as well as any whose “core business” is in fossil fuel exploration, extraction, refining, processing or infrastructure. (A separate 2021 law also requires Maine to divest from private prisons.)

Other pension systems, including New York state’s, have made promises to divest from companies whose primary business drives planet-warming emissions, but are not required to by legislation. In 2015, California passed a law to remove public investments in thermal coal, but a move to extend that to all fossil fuel companies died in the Legislature this session.

MainePERS’ assets — about $18 billion at the end of the last fiscal year — are small in comparison to New York and California, but how they manage their legislative mandate will be closely watched as other states face calls for fossil fuel divestment and wider questions of dealing with climate risk in investing.

Leaders at the pension system stressed a key phrase in the legislation, that any MainePERS divestment decision will be made “in accordance with sound investment criteria and consistent with fiduciary obligations” — crucial to a state constitutional requirement to its pension members.

….

MainePERS Chief Investment Officer James Bennett estimates about $1.2 billion of the system’s total holdings are in fossil fuel investments, split evenly between publicly traded companies and private investments.

Liquidating private investments will be more complicated, he says. Many of the limited partnerships MainePERS is invested in include fossil fuel assets alongside other infrastructure investments and cannot be separated. They’d need to sell the whole thing, if it indeed is within the financial interest of members to do so.

Author(s): Taylor K Brown

Publication Date: 13 July 2022

Publication Site: Governing

Just 2% of Philadelphia’s pension fund could boost the local economy

Mary Pat Campbell

Link:https://www.inquirer.com/opinion/commentary/philadelphia-pension-fund-investments-20240214.html?utm_source=email&utm_campaign=edit_social_share_email_traffic&utm_medium=email&utm_content=&utm_term=&int_promo=

Excerpt:

The primary responsibility of the $8.4 billion Philadelphia pension fund is to assure the continuing financial security promised to city workers upon retirement. The welfare of city employees, along with all Philadelphians, depends on the economic and social well-being of the city itself. Therefore, the Philadelphia Public Banking Coalition has proposed that the city pension fund invest $168 million, 2% of its portfolio, in local economically targeted investments to fund projects that benefit Philadelphians.

These investments would address policy goals while achieving returns as high or higher than many of the fund’s current asset classes. Currently, the 2023 pension fund investment policy describes risky investments in options, futures, forwards, and swap agreements. And there’s a precedent for public policy considerations, for example, in limitations on investments in Russian companies, private prisons, and arms manufacturers. The current portfolio exhibits a strong real estate focus but without preference for Philadelphia projects.

Below are just a few of the possible opportunities for targeted investments that would strengthen the health of Philadelphia’s economy.

Author(s): Stan Shapiro and Peter Winslow, For The Inquirer

Publication Date: 14 Feb 2024

Publication Site: The Philadelphia Inquirer

The Hidden Risk in State Pensions: Analyzing State Pensions’ Responses to the Climate Crisis in Proxy Voting

Mary Pat Campbell

Link: https://stand.earth/resources/the-hidden-risk-in-state-pensions-analyzing-state-pensions-responses-to-the-climate-crisis-in-proxy-voting/

Report PDF: https://stand.earth/wp-content/uploads/2024/01/The-Hidden-Risk-in-State-Pensions-Report.pdf

Graphic:

Excerpt:

A first-of-its-kind report, the Hidden Risk analyzes the proxy voting records and proxy voting guidelines of the 19 public pensions that are in states where a state financial officer has indicated it is a priority issue both to advocate for more sustainable, just, and inclusive firms and markets , and to protect against climate risk.

Ahead of the 2024 shareholder season, a first-of-its-kind report “The Hidden Risk in State Pensions: Analyzing State Pensions’ Responses to the Climate Crisis in Proxy Voting,” from Stand.earth, Sierra Club and Stop the Money Pipeline, analyzes proxy voting records, proxy guidelines, and voting transparency of 24 public pension funds in the USA collectively representing over $2 trillion in assets under management (AUM).

These pensions are based in states where a state financial officer is a member of For the Long Term, a network that advocates for more sustainable, just, and inclusive firms and markets and strives to protect markets against climate risk.

The pensions analyzed include the pension systems of New York City and the states of California, Colorado, Connecticut, Delaware, Illinois, Maine, Maryland, Massachusetts, Minnesota, Nevada, New Mexico, Oregon, Rhode Island, Vermont, Washington, and Wisconsin.

Author(s):

Stand.earth
Sierra Club
Stop The Money Pipeline

Publication Date: 23 Jan 2024

Publication Site: Stand.earth

ESG Crime

Mary Pat Campbell

Link:https://www.bloomberg.com/opinion/articles/2024-01-17/making-esg-a-crime

Excerpt:

Oh sure whatever:

Republican lawmakers in New Hampshire are seeking to make using ESG criteria in state funds a crime in the latest attack on the beleaguered investing strategy.

Representatives led by Mike Belcher introduced a bill that would prohibit the state’s treasury, pension fund and executive branch from using investments that consider environmental, social and governance factors. “Knowingly” violating the law would be a felony punishable by not less than one year and no more than 20 years imprisonment, according to the proposal.

Pensions & Investments reports:

“Executive branch agencies that are permitted to invest funds shall review their investments and pursue any necessary steps to ensure that no funds or state-controlled investments are invested with firms that invest New Hampshire funds in accounts with any regard whatsoever based on environmental, social, and governance criteria,” the bill said.

The New Hampshire Retirement System “shall adhere to their fiduciary obligation and not invest with any firm that will invest state retirement system funds in investment funds that consider environmental, social, and governance criteria, as the investment goal should be to obtain the highest return on investment for New Hampshire’s taxpayers and retirees,” the bill said.

Investors aren’t allowed to consider governance! Imagine if this was the law; imagine if it was a felony for an investment manager to consider governance “with any regard whatsoever.”

….

I’m sorry, this is so stupid. “ESG” is essentially about considering certain risks to a company’s financial results: You might want to avoid investing in a company if its factories are going to be washed away by rising oceans, or if its main product is going to be regulated out of existence, or if its position on controversial social issues will cost it sales, or if its CEO controls the board and spends too much corporate money on wasteful personal projects. Obviously ESG in practice is also other, more controversial things:

  1. If you care about the environment, social issues, etc., you might want to invest in companies that you think are environmentally or socially good, whether or not they are good financial investments.
  2. You might incorrectly convince yourself that the stuff you think is environmentally or socially good is also good for the bottom line: You might have a wishful estimate of how quickly the world will transition away from fossil fuels, to justify your desire not to invest in oil companies. You might tell yourself “this company’s stance on social issues will cost it lots of customers” when really the customers don’t care, but you do.

But if you make it a crime for investors to consider certain financial risks then you get too much of those risks.

In particular, I suspect, you get too much governance risk. If every investor tomorrow said “okay we don’t care about the environment,” most companies probably wouldn’t ramp up their pollution: Their executives probably don’t want to pollute unnecessarily, polluting probably wouldn’t help the bottom line, and many companies just sit at computers developing software and couldn’t pollute much if they wanted to. But if every investor tomorrow said “okay we don’t care about governance,” then, I mean, “governance” is just a way of saying “somebody makes sure that the CEO is doing a good job and doesn’t pay herself too much.” If the investors don’t care about that, then a lot of CEOs will be happy to give themselves raises and spend more time on the corporate jet to their vacation homes.

Author(s): Matt Levine

Publication Date: 17 Jan 2024

Publication Site: Bloomberg

As ESG Investments Soften and Pressure Grows on Allegedly ‘Woke’ Finance Giants, Conservative Investment Firms Scour for Missed Opportunities

Mary Pat Campbell

Link: https://www.nysun.com/article/as-esg-investments-soften-and-pressure-grows-on-allegedly-woke-finance-giants-conservative-investment-firms-scour-for-missed-opportunities

Excerpt:

In May, the United Kingdom’s version of the Securities and Exchange Commission will begin enforcing its pledge to crack down on so-called greenwashing by companies wishing to trade on the label of being green-friendly.  

The Financial Conduct Authority’s rules, announced in late November, come as U.S. traders await stronger regulations from the SEC. That body moved in September to curb misleading marketing practices by requiring 80 percent of funds that claim to be “sustainable,” “green,” or “socially responsible” to actually be so. 

The sustainability disclosure requirements are now deemed a necessity after regulators found “environmental, social, and corporate governance” analysts at Goldman Sachs and Germany’s DWS Group were promoting investments that were not as ESG-friendly as they claimed. 

“The portfolio managers weren’t necessarily doing all of the work that they said they were doing,” the associate director of sustainability research for Morningstar Research Services LLC, Alyssa Stankiewicz, said. “They didn’t have documentation or data maybe related to the ESG-ness of these investments.”

At the same time as ESG-friendly firms are facing accusations of insincerity, they’re also coming under pressure from state pension funds in states with Republican-controlled governments that don’t want their employees’ retirement funds affected by what they view as politicized, left-leaning investing strategies.

Author(s): SHARON KEHNEMUI

Publication Date: 16 Jan 2024

Publication Site: NY Sun

How U.S. Hospitals Undercut Public Health

Mary Pat Campbell

Link: https://undark.org/2023/10/05/hospital-emissions-deaths/

Excerpt:

The average energy intensity of U.S. hospitals is more than twice that of European hospitals, with no comparable quality advantage. In recent years, less than 2 percent of hospitals were certified as energy efficient by the U.S. Environmental Protection Agency’s Energy Star program, and only 0.6 percent, or 37 in total, have been certified for 2023. As a result, in 2018, the U.S. health care industry emitted approximately 610 million tons of greenhouse gases, or GHGs — the equivalent of burning 619 billion pounds of coal. This represented 8.5 percent of U.S. GHG emissions that year, and about 25 percent of global health care emissions.

If U.S. health care were its own country, it would rank 11th worldwide in GHG pollution. If every nation produced an equivalent per capita volume of health care emissions, it would immediately consume nearly the entire global carbon budget required to limit global warming to 1.5 degrees Celsius (2.7 degrees Fahrenheit) by 2030. Without even considering their global impact, air pollution from U.S. emissions accounts for an estimated 77,000 excess deaths annually in the U.S. alone. And according to one 2016 study, emissions from the U.S. health care system lead to the loss of more than 400,000 years of healthy life among Americans. This level of harm is commensurate with the tens of thousands of deaths attributable to medical errors each year, around which a massive patient safety movement has been organized in response. But despite these human costs — along with sizable financial costs — there has been no parallel policy movement to address the health care industry’s role in undermining health through its GHG emissions.

Author(s): DAVID INTROCASO & ERIC REINHART

Publication Date: 5 Oct 2023

Publication Site: Undark

Exxon, Apple and other corporate giants will have to disclose all their emissions under California’s new climate laws – that will have a global impact

Mary Pat Campbell

Link:https://theconversation.com/exxon-apple-and-other-corporate-giants-will-have-to-disclose-all-their-emissions-under-californias-new-climate-laws-that-will-have-a-global-impact-214630

Graphic:

Excerpt:

Many of the world’s largest public and private companies will soon be required to track and report almost all of their greenhouse gas emissions if they do business in California – including emissions from their supply chains, business travel, employees’ commutes and the way customers use their products.

That means oil and gas companies like Chevron will likely have to account for emissions from vehicles that use their gasoline, and Apple will have to account for materials that go into iPhones.

It’s a huge leap from current federal and state reporting requirements, which require reporting of only certain emissions from companies’ direct operations. And it will have global ramifications.

California Gov. Gavin Newsom signed two new rules into law on Oct. 7, 2023. Under the new Climate Corporate Data Accountability Act, U.S.- companies with annual revenues of US$1 billion or more will have to report both their direct and indirect greenhouse gas emissions starting in 2026 and 2027. The California Chamber of Commerce opposed the regulation, arguing it would increase companies’ costs. But more than a dozen major corporations endorsed the rule, including Microsoft, Apple, Salesforce and Patagonia.

Author(s): Lily Hsueh

Publication Date: 10 Oct 2023

Publication Site: The Conversation

State legislators: Oregon treasury’s investment choices create risk to us all

Mary Pat Campbell

Link: https://www.portlandtribune.com/opinion/state-legislators-oregon-treasury-s-investment-choices-create-risk-to-us-all/article_65cae490-406b-11ee-a841-a3bbfbc99a7f.html

Excerpt:

The Oregon Public Employee Retirement System (PERS) pension fund has been in the national spotlight recently because of risks from private investments hidden from the public. What risks? Risk to public employees’ retirement, risk to taxpayers who have to pick up the shortfall, risk to workers as private equity asset managers rake in huge profits at Oregonians’ expense, risk to all Oregonians as private equity undermines our communities, and risk to the climate as private equity firms are uniquely exposed to fossil fuel companies.

A recent article in the business section of The New York Times, “The Risks Hidden in Public Pension Funds,” focuses on the Oregon treasury’s unusually large private investments in PERS. The treasury has long hailed its private equity investments for producing high rates of return, overlooking warning signs that the managers report earnings that turn out to be overstated. The Times reported, “they aren’t taking account of the true risks embedded in private equity. Oregon’s pension fund is over 40% more volatile than its own reported statistics show.”

…..

Divest Oregon’s 2022 report, “Oregon Treasury’s Private Investment Transparency Problem,” documents that more than 50% of PERS is in private investments, with various labels (“private equity,” “alternatives,” “opportunity,” even real estate).

These private funds are heavily invested in coal, oil and gas. The treasury increased its investments in fossil fuels in private investments from 2021 to 2022 (the most recent data released by the state) and continues to invest billions in the fossil fuel industry in 2023, for example in the private investment firm GNP. While Divest Oregon applauds Treasurer Tobias Read in his work to create a “decarbonization plan” for PERS, the treasurer must respond to calls to stop new private investments that fund the climate crisis.

Author(s): State Sen. Jeff Golden and state Reps. Khanh Pham and Mark Gamba

Publication Date: 29 Aug 2023

Publication Site: Portland Tribune

Fiduciary principles need to be reaffirmed and strengthened in public pension plans

Mary Pat Campbell

Link: https://reason.org/policy-brief/fiduciary-principles-need-to-be-reaffirmed-strengthened-public-pension-plans/

Executive Summary:

Fiduciaries are people responsible for managing money on behalf of others. The fundamental fiduciary duty of loyalty evolved over centuries, and in the context of pension plans sponsored by state and local governments (“public pension plans”) requires investing solely in plan members’ and taxpayers’ best interests for the exclusive purpose of providing pension benefits and defraying reasonable expenses. This duty is based on the notion that investing and spending money on behalf of others comes with a responsibility to act with an undivided loyalty to those for whom the money was set aside.

But the approximately $4 trillion in the trusts of public pension plans may tempt public officials and others who wish to promote—or, alternatively, punish those who promote— high-profile causes. For example, in recent years, government officials in both California and Texas, political polar opposites, have acted to undermine the fiduciary principle of loyalty. California Gov. Gavin Newsom’s Executive Order N-19-19 describes its goal “to leverage the pension portfolio to advance climate leadership,” and a 2021 Texas law prohibits investing with companies that “boycott” energy companies to send “a strong message to both Washington and Wall Street that if you boycott Texas Energy, then Texas will boycott you.” Both actions and others like them, attempt to use pension assets for purposes other than to provide pension benefits, violating the fundamental fiduciary principle of loyalty.

The misuse of pension money in the public and private sectors has a long history. The Employee Retirement Income Security Act (ERISA), signed into law by President Gerald Ford in 1974, codified fiduciary principles for U.S. private sector retirement plans nearly 50 years ago and is used as a prototype for pension fiduciary rules in state law and elsewhere. Dueling sets of ERISA regulations issued within a two-year period during the Trump and Biden administrations consistently reinforced the principle of loyalty. State legislation and executive actions, however, have weakened and undermined it, even where it is codified elsewhere in state law.

Thirty million plan members rely on public pension funds for financial security in their old age. The promises to plan members represent an enormous financial obligation of the taxpayers in the states and municipalities that sponsor these plans. If investment returns fall short of a plan’s goals, then taxpayers and future employees will be obligated to make up the difference through higher contribution rates.

The exclusive purpose of pension funds is to provide pension benefits. Using pension funds to further nonfinancial goals is not consistent with that purpose, even if it happens to be a byproduct. This basic understanding has been lost in the recent politically polarized public debates around ESG investing—investing that takes into account environmental, social, and governance factors and not just financial considerations.

It is critically important that fiduciary principles be reaffirmed and strengthened in public pension plans. The potential cost of not doing so to taxpayers, who are ultimately responsible for making good on public pension promises, runs into trillions of dollars. Getting on track will likely require a combination of ensuring the qualifications of plan fiduciaries responsible for investing, holding fiduciaries accountable for acting in accordance with fiduciary principles, limiting the ability of nonfiduciaries to undermine and interfere with fiduciaries, and separating the fiduciary function of investment management from settlor functions like setting funding policy and determining benefit levels.

Author(s): Larry Pollack

Publication Date: 11 May 2023

Publication Site: Reason

It’s Easy To Make Oil Companies ESG

Mary Pat Campbell

Link: https://www.bloomberg.com/opinion/articles/2023-07-12/it-s-easy-to-make-oil-companies-esg#xj4y7vzkg

Excerpt:

You can do this with anything! Absolutely anything:

  • Horrible Coal Inc. wants to raise money.
  • It sets up a special purpose vehicle, Hypertechnical Investments Ltd.
  • Horrible Coal issues bonds to Hypertechnical Investments.
  • Hypertechnical issues its own bonds to ESG funds: “We are just a little old investment firm, just two traders and two computers, no carbon emissions here! And our credit is very good, because we have no other liabilities and our assets are all investment-grade bonds. ‘Which investment-grade bonds,’ did you ask? Sorry, I’m not sure I heard you right, you’re breaking up. Anyway we’ll look for your check, bye!”

Though my made-up names are silly, and in the actual Aramco case one of the not-an-oil-company SPVs is named “GreenSaif Pipelines Bidco.” “Pipelines” is right in the name! The only way you would think that GreenSaif Pipelines Bidco “had no direct links to the fossil-fuel industry” is if (1) you started reading the name but stopped after you got to the “Green” part (plausible!) or (2) you never read the name at all, never thought about it, just looked at the balance sheet and saw only shares of stock, not pipelines or oil wells, and said “ah, stock, well, that’s green enough.”

Author(s): Matt Levine

Publication Date: 12 July 2023

Publication Site: Money Stuff at Bloomberg

Minority- and Women-Owned Business Enterprise: Asset Management and Financial Institution Strategy Report

Mary Pat Campbell

Link: https://www.osc.state.ny.us/files/reports/special-topics/pdf/mwbe-fiscal-2022-23.pdf?utm_content=20230610&utm_medium=email&utm_source=weekly+news

Graphic:

Excerpt:

In the 2022-23 fiscal year, the Fund recorded growth in its investments with MWBE managers. Despite increased market volatility from the banking disruptions to small financial institutions and the regional banking system and the rise in interest rates, the Fund has continued its steady deployment of capital to MWBE investment managers. As detailed in the tables below, total investments and commitments of Fund capital to MWBE partners for 2022-23 was $31.5 billion.

….

While Fund management is very pleased with these results, our team is committed to retaining our long-term focus on steady, incremental growth, partnering with successful MWBE managers. The 2022-23 results illustrate another important measure of the success of the Fund’s MWBE Strategy. Of the approximate $141 billion of the Fund’s assets that are actively and externally managed, 22.3 percent is managed by MWBEs.

Author(s): Comptroller Thomas P. DiNapoli

Publication Date: May 2023

Publication Site: Office of the New York State Comptroller