ALBANY — State Comptroller Thomas DiNapoli is cutting the state pension fund’s direct investments in eight more oil and gas companies, including ExxonMobil, as part of his plan to combat global warming through Wall Street.
DiNapoli argues that investment in oil and gas companies, even blue chip stocks such as ExxonMobil, pose a long-term risk to investors because he believes they aren’t ready to transition to the future low-carbon economy. Last week, DiNapoli announced he will sell $26.8 million in securities in the eight companies as part of his Climate Action Plan and said he next will evaluate the fund’s investments in utilities nationwide.
“I very strongly believe that climate change is a risk, not just for the planet, but to investors as well,” DiNapoli told Newsday. “It’s not about managing politics. It’s about managing risk and return.”
DiNapoli is the sole trustee of the $259.9 billion pension that serves more than 1 million public sector workers and retirees. The fund’s return on investments also reduces the cost that state and local governments must pay into the pension system as the employer’s share. Lower investment return can force a larger employer’s share.
Critics, however, said investments always have had risks and shouldn’t be subject to such “arbitrary” preferences.
“Arbitrary considerations like this make it more difficult for pension fund investments to generate the highest possible return,” said Ken Girardin, research director of the fiscally conservative Empire Center for Public Policy in Albany. “And since these pensions are guaranteed by state taxpayers, taxpayers risk having to shoulder higher costs.”
Last year, DiNapoli, a Great Neck Plaza Democrat, sold $238 million in securities in 21 shale oil- and gas-producing companies, including Hess Corp., which he also said failed to demonstrate they are prepared for the transition to a low-carbon economy. In 2021, he directed the sale of more than $7 million in investments in “oil sands” companies. Oil sands companies produce a heavier kind of crude oil from a mix of sand, water, clay and bitumen that requires a more costly carbon-intensive production method.
The independent Citizens Budget Commission, which analyzes state spending, hasn’t taken a position on DiNapoli’s Climate Action Plan, but said his pension investments generally have been sound.
“New York state has one of the best-funded pension plans in the country, in large part because of effective investments and conservative forecasting by the comptroller,” said Patrick Orecki, the commission’s director of state studies. “Still, the comptroller has a fiduciary responsibility to protect the pension system’s assets … Any investment decision has some risk, but the comptroller does have a strong record of achieving targeted returns on investment.”
New York Republican leaders criticized DiNapoli’s strategy.
“The state is constitutionally required to pay pensions, and if the pension fund can’t keep up, the added cost is paid directly by property taxpayers,” said Senate Republican leader Robert Ortt of North Tonawanda. “Treating it otherwise is irresponsible and another example of silly politics.”
Assembly Republican Will Barclay of Pulaski said making pension investments based on politics is “a dangerous precedent.”
“While restricting investments in certain oil and gas companies fits within the state’s climate plan, we should be focusing on ways to maximize growth in our pension funds so we can provide the best benefit for retiree,” he added.
DiNapoli’s Climate Action Plan also will no longer directly invest pension funds into private-sector market companies focused on extracting or producing oil, gas and coal, and will increase “climate index investments” by 50% to more than $10 billion over the next two years and double those investments by 2035.
The state pension fund still maintains $500 million in investments in ExxonMobil as part of a grouping of stocks in a single index. DiNapoli called that a “passive” investment he doesn’t directly control.
A spokesman for ExxonMobil didn’t respond to requests for comment. The company’s website said its efforts to react to climate change include reducing methane emissions and developing systems to reduce emissions.
DiNapoli also drew some criticism from the left for maintaining investment in the index that includes ExxonMobil.
“I am disappointed in the shortsightedness of the decision not to fully divest from Exxon, let alone the other oil majors that continue to actively drive humanity over the climate cliff,” Senate Finance Committee chairwoman Liz Krueger (D-Manhattan) said.
“However,” Krueger said, “the fact remains that Comptroller DiNapoli has taken a much more responsible approach to the climate crisis than many comparable fiduciaries who have failed to act at all … excuses that justify incrementalism today will ring hollow to our grandchildren suffering from the irreversible consequences of our inaction.”