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A03712 Summary:

COSPNSRMosley, Fahy, Simon, Thiele, Gottfried, Seawright, O'Donnell, Steck, Englebright, Carroll, Glick, Colton, Blake, Niou, Jaffee, Rivera, Davila, Rodriguez, Zebrowski, Barron, Rosenthal L, Woerner, McDonald, Gunther, Dinowitz, Pellegrino, Peoples-Stokes
Amd §423, R & SS L
Relates to limitations on investments of public pension funds.
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A03712 Memo:

submitted in accordance with Assembly Rule III, Sec 1(f)
  TITLE OF BILL: An act to amend the retirement and social security law, in relation to limitations on investments of public pension funds   SUMMARY OF SPECIFIC PROVISIONS: Section 1: The act is named the 'fossil fuel divestment act." Section 3a: Amends the Retirement an& Social Security Law to prohibit the State Comptroller from investing monies of the Common Retirement Fund in of the top 200 companies that hold the largest carbon content fossil fuel reserves. Divestment from coal companies. must be completed within One year; divestment from all other fossil fuel companies must be completed five years of the effective date of this subdivision. Section 3b: Permits the Comptroller to cease divestment or reinvest in previously divested companies if he/she can demonstrate that as a direct result of such divestment the Fund has become or shall become:(i) equal to or less than 99.5 per cent; or (ii) 100 per cent less 50 basis points of the hypothetical value of all assets under management by, or on behalf of, the Fund assuming no divestment from any company had occurred. Section 3c: Requires the Comptroller to identify all companies subject to divestment in which the 'Fund has holdings, and to report annually on the progress of divestment.   JUSTIFICATION: Climate change is a real and serious threat to the health, welfare and prosperity of all New Yorkers. Maintaining the status quo of fossil fuel energy production will unquestionably lead to a self-created catastro- phe. Therefore, the State of New York has a responsibility to take steps to avert this disastrous result. Divesting the New York State Common Retirement Fund from all investments in fossil fuels, as mandated by this legislation, is far from a silver bullet, but it is one important step among many necessary to move our climate away from the precipice. The consensus of the international scientific community is that climate change will lead to rising sea levels, increasingly intense storm events and droughts, as well as threats to global water and food supplies and loss of critical biodiversity, threatening lives, livelihoods and the integrity of our society. Among the risks New York faces are: Harm to human health and safety; increasing healthcare costs/ Increasing costs to municipalities and local governments; Higher insurance costs; Loss of property value/ Contamination of water and soil; Deforestation; Loss of wetlands; Losses to agriculture, fisheries, and tourism; and Destruction of homes and displacement of families and communities. The 2009 Copenhagen Accords stated that an increase in global average temperature of more than 21 C would lead to an unsafe risk of irrevers- ible climate change. In order to stay below 21C, there is a limit to the amount of carbon dioxide emissions that can be released. globally through the burning of fossil fuels - 886 Gigatons between the years 2000 and 2050. 321 Gt have been burned from 2000 to 2010, leaving a remaining carbon budget of approximately 565 Gt. Currently proven fossil fuel reserves belonging to private and public companies total an over- whelming 2,795 Gt of potential emissions, not including as yet undiscov- ered reserves that fossil fuel companies spend billions of dollars each year to find. This means that in order to avoid causing catastrophic climate change, at least 80% of all current proven coal reserves, half of gas reserves and one third of oil reserves must stay in the ground. The State Common Retirement Fund, with an estimated value of over $180 billion, invests at least 85.12-billion in public pension money inn companies that mine, drill and produce fossil fuels. The CRF is one of the largest and most visible institutional investors in the world. By divesting from fossil fuels, the CRF will send a message that it is unacceptable for any institution to profit from activities that threaten the future of our society, and will begin the process of delegitimizing a business model that, while financially profitable in the short run, is socially and morally bankrupt. As a state, we cannot commit to the steps necessary to prevent climate change while maintaining a financial inter- est in companies whose profits depend on the continuation of practices that cause climate change. As Upton Sinclair wrote, "it is difficult to get a man to understand something when his salary depends on his not understanding it" The office of the State Comptroller has made a significant effort to use stockholder engagement to influence the actions of climate-damaging fossil fuel companies. However, these companies have largely ignored entreaties from OSC and other institutional investors, played down the threat posed by climate change, and scoffed at the possibility of chang- ing their way of doing business. In the end, the profitability of fossil fuel companies is based solely on their ability to supply far more carbon than the atmosphere can safely absorb a business plan that is at odds with physical reality, making stockholder engagement a futile endeavor and demonstrating the necessity of divestment. Divestment is wholly in accord with the state's fiduciary responsibility to protect the value of the pension fund. Numerous business, financial and government leaders worldwide have warned that investing in fossil fuel companies undermines the soundness of investment portfolios, including the governor of the Bank of England, Mark Carney; the Presi- dent of the World Bank, Jim Yong Kim; and former Treasury Secretary Henry Paulson. Given the growing understanding of the reality of climate change and the increasing likelihood of national and international action to reduce fossil fuel use, companies whose value is based on unburnable carbon reserves risk rapid devaluation as a result of these stranded assets. A prudent fiduciary must also take into account the broader risk of economic and market disruption' posed by climate change, the evidence of which has already been seen in the aftermath of Super- storm Sandy and other extreme weather events. To further address concerns about meeting fiduciary obligations, this bill contains a financial safety valve that would permit the Comptroller to cease and/or reverse divestment if he or she can demonstrate significant lose of value to the CRF as a direct result of divestment. This bill provides a five-year horizon for completion of divestment from all fossil fuels (including coal, oil, and natural gas) in order to maximize flexibility and minimize financial risk. However, divestment from the coal industry in particular is an urgent financial and environmental necessity, and it is therefore specially mandated to occur within one year. The CRF has already lost over $100 million through coal investments in the,past three years at a time of generally strong market growth, and those investments are not Likely to recover. Coal is one of the dirtiest, most carbon intensive sources of energy; emitting more carbon dioxide per unit of energy produced than oil or gas. Recent analyses have found that over 804 of worldwide coal reserves, including 904 of US reserves, must stay in the ground in order to stay below the 21 C limit. In taking the responsible step of divesting from fossil fuels, New York would take a leading role in a global movement that includes more than 160 institutions and local governments, including The New School, and Stanford and Syracuse Universities; the cities of Seattle, San Francis- co, Portland, Minneapolis, and Ithaca; the World Council of Churches, and the United Methodist Church USA; Guardian Media Group and the Rocke- feller Brothers Fund; and the sovereign wealth fund of Norway. Divestment is financially prudent, morally imperative, responsible poli- cymaking, and the time for action is now.   PRIOR LEGISLATIVE HISTORY: 2015/16: A8011-A Referred to Governmental Employees   FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: Undetermined   EFFECTIVE DATE: This act shall take effect immediately.
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A03712 Text:

                STATE OF NEW YORK
                               2017-2018 Regular Sessions
                   IN ASSEMBLY
                                    January 30, 2017
        Introduced  by  M.  of A. ORTIZ, MOSLEY, FAHY, SIMON, THIELE, GOTTFRIED,
          BARRON -- Multi-Sponsored by --  M.  of  A.  COOK  --  read  once  and
          referred  to the Committee on Governmental Employees -- recommitted to
          the Committee on Governmental Employees in  accordance  with  Assembly
          Rule  3,  sec.  2  --  committee  discharged,  bill  amended,  ordered
          reprinted as amended and recommitted to said committee
        AN ACT to amend the retirement and social security law, in  relation  to
          limitations on investments of public pension funds
          The  People of the State of New York, represented in Senate and Assem-
        bly, do enact as follows:
     1    Section 1. This act shall be known and may be  cited  as  the  "fossil
     2  fuel divestment act".
     3    § 2. Section 423 of the retirement and social security law, as amended
     4  by chapter 770 of the laws of 1970, is amended to read as follows:
     5    §  423.  Investments.    [a.]  1.  On  and after April first, nineteen
     6  hundred sixty-seven, the comptroller shall invest the  available  monies
     7  of  the common retirement fund in any investments and securities author-
     8  ized by law for each retirement system and shall hold  such  investments
     9  in his name as trustee of such fund, notwithstanding any other provision
    10  of  this  chapter.  Participating interests in such investments shall be
    11  credited to each retirement system in the manner and at the time  speci-
    12  fied  in  [paragraph] subdivision two of section four hundred twenty-two
    13  of this article.
    14    [b.] 2. (a) To assist in the management of the monies  of  the  common
    15  retirement  fund,  the  comptroller shall appoint an investment advisory
    16  committee consisting of not less than seven members who shall serve  for
    17  his  term of office. A vacancy occurring from any cause other than expi-
    18  ration of term shall be filled by the comptroller for the  remainder  of
    19  the term. Each member of the committee shall be experienced in the field
         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.

        A. 3712--A                          2
     1  of  investments  and shall have served, or shall be serving, as a senior
     2  officer or member of the board of an insurance company,  banking  corpo-
     3  ration  or  other  financial or investment organization authorized to do
     4  business  in the state of New York. The committee shall advise the comp-
     5  troller on investment policies relating to  the  monies  of  the  common
     6  retirement  fund  and  shall  review,  from time to time, the investment
     7  portfolio of the fund and make such recommendations  as  may  be  deemed
     8  necessary.
     9    (b) The comptroller shall appoint a separate mortgage advisory commit-
    10  tee,  with  the advice and consent of the investment advisory committee,
    11  to review proposed mortgage and real estate investments  by  the  common
    12  retirement  fund. In making investments, as authorized by law, the comp-
    13  troller shall be guided by policies established by each  committee  from
    14  time  to  time; and, in the event the mortgage advisory committee disap-
    15  proves a proposed mortgage or real estate investment, such shall not  be
    16  made.
    17    (c)  No officer or employee of any state department or agency shall be
    18  eligible for  membership  on  either  committee.  Each  committee  shall
    19  convene  periodically  on  call  of  the  comptroller, or on call of the
    20  chairman. The members of each committee shall be entitled to  reimburse-
    21  ment  for  their  actual  and  necessary  expenses  but shall receive no
    22  compensation for their services.
    23    3. (a) Notwithstanding any provision of law to the contrary, the comp-
    24  troller shall not have the power to invest the available monies  of  the
    25  common  retirement  fund  in any stocks, debt or other securities of any
    26  corporation or company, or any subsidiary, affiliate or  parent  of  any
    27  corporation  or  company,  among the two hundred largest publicly traded
    28  fossil fuel companies, as established by carbon content  in  the  compa-
    29  nies'  proven  oil,  gas  and  coal  reserves. The comptroller shall, in
    30  accordance with sound investment criteria and consistent with his or her
    31  fiduciary obligations, divest any such stocks or other securities wheth-
    32  er they are owned directly or held  through  separate  accounts  or  any
    33  commingled  funds.  Divestment  pursuant  to  this  subdivision  must be
    34  completed within five years of the effective date of  this  subdivision,
    35  with  the  exception  of  companies engaged in the mining, extraction or
    36  production of coal, divestment from which must  be  completed  no  later
    37  than one year after the effective date of this subdivision.
    38    (b)  The comptroller shall be permitted to cease divesting from compa-
    39  nies under paragraph (a) of this subdivision, reinvest in companies from
    40  which it divested under paragraph (a) of this subdivision,  or  continue
    41  to invest in companies from which it has not yet divested upon clear and
    42  convincing  evidence showing that as a direct result of such divestment,
    43  the total and aggregate value of all assets under management by,  or  on
    44  behalf of, the common retirement fund becomes or shall become: (i) equal
    45  to  or  less  than ninety-nine and one-half percent; or (ii) one hundred
    46  percent less fifty basis points of the hypothetical value of all  assets
    47  under  management by, or on behalf of, the common retirement fund assum-
    48  ing no divestment from any company had occurred under said paragraph (a)
    49  of this subdivision.   Cessation  of  divestment,  reinvestment  or  any
    50  subsequent  ongoing  investment  authorized  by  this  section  shall be
    51  strictly limited to the minimum steps necessary to avoid the contingency
    52  set forth in the preceding sentence. For any  cessation  of  divestment,
    53  and  in  advance  of such cessation, authorized by this subdivision, the
    54  comptroller shall provide a written report to the attorney general,  the
    55  senate  standing committee on civil service and pensions, and the assem-
    56  bly standing committee on governmental employees, updated  semi-annually

        A. 3712--A                          3
     1  thereafter  as  applicable, setting forth the reasons and justification,
     2  supported by clear and convincing evidence, for its decisions  to  cease
     3  divestment, to reinvest or to remain invested in fossil fuel companies.
     4    (c)  Within  sixty days of the effective date of this subdivision, the
     5  comptroller shall facilitate the identification of fossil fuel companies
     6  from which the common retirement fund is required to divest under  para-
     7  graph  (a)  of  this  subdivision, and file a copy of this list with the
     8  attorney general, the senate standing committee  on  civil  service  and
     9  pensions, and the assembly standing committee on governmental employees.
    10  Annually thereafter, the public fund shall file a report with the attor-
    11  ney  general,  the  senate  standing  committee  on  civil  service  and
    12  pensions, and the assembly standing committee on governmental  employees
    13  that includes: (i) all investments sold, redeemed, divested or withdrawn
    14  in  compliance  with  paragraph  (a)  of  this subdivision; and (ii) all
    15  prohibited investments from which the common retirement fund has not yet
    16  divested under paragraph (a) of this subdivision.
    17    § 3. This act shall take effect immediately.
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