Fossil fuel divestment impact on New York State Pensions

December 1, 2017

Researched and produced by Global Analytic Services, Inc

Commissioned by Suffolk AME

Climate change is real. It has a profound effect on how people engage with the environment in their everyday lives.  As

a result, the role climate change has on the global economy has become a key factor when evaluating and planning future investments in sector-based and diversified holdings in relation to a corporation’s or fund’s exposure. This document provides evidence-based views on the likely impact on pensioners within the context of climate change and divestment from fossil fuels.

The rapidly developing global economy has increased demand for existing fuel sources and created a dynamic where alternative energy sources are created almost daily. This influx of energy industry offerings has triggered

greater stakeholder scrutiny in the area of divestment. It is the fiduciary responsibility of the Trustees and fund managers to accurately assess data and employ investment strategies that garner the greatest return for members. As noted in Ernst and Young’s Global Corporate Divestment Study, “for many corporations, investment funds, and public pension systems, divestments are now a fundamental part of economic strategy — leading companies focus on selling assets in the same way they focus on acquisitions.” 1 Divestment can enhance the corporate valuation toolbox and guide returns. The Ernst and Young study continues, “divestments once seen as a short-term tactical tool to raise capital or pay down debt, today , provide longer-term value — and growth” and at times can have social policy implications. 2 Divestment, particularly from large global investments, can also pose investment risk. For the purposes of this study the social policy conversation centers on climate change and its impact on investment strategies.

This report does not debate the science of climate change. This report focuses on the economic reality of divesting from fossil fuels, the subsequent effect on pension funds, and the fiduciary responsibility of fund Trustees.

Understanding that nothing can be effectively accomplished in a vacuum, this report acknowledges the need for a global multi-lateral strategy that implements measured, consistent, and sustainable actions to address the climate realities of today and tomorrow, while also reviewing the potential impact divesting from fossil fuels would have on investment funds, notably the New York State Common Retirement Fund.

Global Analytic Services’ researchers established a baseline of key points driving the climate change debate and used those points and associated timelines to evaluate the economic impact on investment funds; principally the New York State Common Retirement Fund “The Fund”.

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