Event: “GreenFaith Climate Finance Briefing Date: Thursday, February 24, 2022 NYS Comptroller Thomas P. DiNapoli’s Keynote Address Thank you Reverend Mohaupt, for that generous introduction, and thank you all. Thanks as well to Reverend Fletcher Harper for inviting me to speak today. And let me also acknowledge your other keynote speaker, Dr. Atul Shah. Because our It’s good to join with you.
Covid-19 has created even deeper economic insecurity in nations across the globe—further widening the gaps that we know have been growing for years, in part fueled by the environmental damage caused by climate change.
Fund is invested globally and across the economy, as the world moves to net zero emissions, so will the Fund” – C omptroller DiNapol
I want to commend GreenFaith for your work to build a multi-faith global climate and environmental movement dedicated to creating a more equitable, sustainable world. My faith tradition is Roman Catholicism. In Laudato Si, Pope Francis’ encyclical on climate change, the Pope wrote:
I urgently appeal for a new dialogue about how we are shaping the future of our planet. We need a conversation which includes everyone, since the environmental challenge we are undergoing, and its human roots, concern and affect us all… All of us can cooperate as instruments of God for the care of creation, each according to his or her own culture, experience, involvements and talents. The urgency of this dialogue—and the actions needed— have only grown during this devastating pandemic, as
GreenFaith’s efforts to encourage religious leaders and their investment advisors to leverage the power of pension funds and other investments against this evergrowing threat to the future of our planet have never been more important. I’d like to share with you, as trustee and fiduciary of the New York State Pension Fund, some of the engagement and investment strategies I’ve employed to address climate change. I come to this challenge with an abiding desire to do what’s right and necessary for our planet and its people, but with the overarching responsibility to protect the retirement security of our pension system’s 1.1 million members. I am proud to tell you that today, the New York State Pension Fund is among the best run, best funded,
public pension systems in America, and also one of the most engaged, and successful, institutional investors in addressing climate change. It’s about doing well by doing good. As an investor and a fiduciary, addressing climate change has been one of my key priorities for years. The reason is simple: It’s the right and the smart approach. Climate change poses enormous risks and opportunities for our society, our economy and our investments. The impacts of inaction are potentially catastrophic. As we know, the Paris Agreement—which our nation has thankfully rejoined—set the goal of limiting global warming to less than two degrees Celsius, which can only be achieved by governments and private sector entities—really everyone— realizing net-zero greenhouse gas emissions by 2050, at the latest. Put simply, net zero refers to the balance between the amount of greenhouse gas produced and the amount removed from the atmosphere. We reach net zero when the amount we add is no more than the amount taken away. A growing list of governments, companies and investors around the world have set net zero targets and are adopting policies and plans to realize those 2050 goals.
Let me give you some more detail about each of these key components of our Climate Action Plan. First, engagement. It’s important to understand that, as a pension fund, we are primarily universal, long-term investors, and have successfully employed passive index strategies for many years. Therefore, we have a strong preference for engagement with our portfolio companies and managers. We want our companies to succeed, and our investments to provide strong returns for decades to come. When we identify significant risks to that successful strategy, we engage. That engagement takes many forms – direct discussion with directors and executives, letter writing, proxy voting, filing shareholder proposals and even press strategies. We have focused our climate engagements on the highest impact sectors and largest emitters, and often collaborate with other investors through organizations and initiatives such as Climate Action 100+, CDP, PRI and Ceres.
Because our Fund is invested globally and across the economy, as the world moves to net zero emissions, so will the Fund. That’s what our own Net Zero 2040 goal is all about. My view is that you can’t simply divest your way to net zero—index you must use your resources to advocate for policies that will drive this change and engage with the biggest emitters and move them toward net zero. And you must invest in the transition to the emerging low carbon economy. There are multiple strategies that we must use to realize our net zero goals. We formalized those strategies in our 2019 Climate Action Plan, where we spell out our fundamental climate investment beliefs and describe our comprehensive approach to addressing climate risk.
Our collaboration with the Church Commissioners for England’s stewardship team was among our most impactful climate engagement initiatives, and an example of how a faith community worked in partnership with us for years to move a major corporate player. We teamed up with the Church Commissioners in 2016 to file a shareholder proposal calling on Exxon to explain its plans to protect its business in the wake of the Paris Agreement– something that the company had steadfastly refused to do.
Another critical component of our strategy is Investing, or more specifically, capitalizing climate solutions. A successful transition of the global economy to net-zero will require massive investment of trillions and trillions of dollars annually in clean energy, new technologies and resources. And it’s not just wind turbines, solar panels, electric vehicles and battery storage that need investment dollars. It’s also the technology and underlying components that are needed for power generation, electric distribution, hydrogen infrastructure and lowemissions manufacturing. The first year we filed the resolution, we received 38% of the vote. The following year, when we refiled and worked with the Church Commissioners for England to build support, we received an amazing 62%. In response, in 2018, Exxon finally produced the report requested by shareholders, which was an enormous step forward.
As we work toward addressing climate risk and transitioning to the net-zero economy, we must also ensure that we protect and support the workers and communities that are most impacted by the transition. Not only is it important for us to invest in this transition —we can also increase returns by seizing on the
Over the years, we have seen many companies respond with significant actions that Working together, the power of our Funds can move address our concerns – such adopting greenhouse gas emission companies, nations, and the world, toward a more reduction targets, setting net-zero equitable, more sustainable, more economically goals and committing to increase the use of renewable energy. secure future.” – Comptroller DiNapol Policy Advocacy is another key. We are not going to address climate change, reduce investment risk and protect our Fund without governments around the world adopting robust policies that are necessary to drive the transition to a net-zero economy. We do this by commenting on regulations, actively supporting or opposing relevant legislation and rulemaking, and meeting with and testifying before lawmakers and policy makers. Getting the right policies in place to support, incentivize and drive the transition to a net-zero world may well be the single most important piece of this complex puzzle. Getting the right policies in place to support, incentivize and drive the transition to a net-zero world may well be the single most important piece of this complex puzzle.
opportunities that it offers. Again, we can do well by doing good. This win-win approach motivates our Fund’s commitment to investing $20 billion across all asset classes through our Sustainable Investment and Climate Solutions Program, of which we have already invested $15.84 billion. Our investment in climate solutions has taken many forms, including actively and passively managed public equity strategies, Green Bonds, and clean and green infrastructure and real estate funds. As part of our program, we recently announced a new $2 billion commitment to a Climate Transition Index that was developed by FTSE Russell in collaboration with the Church of England Pensions Board.
The Index combines responsible investment and active ownership with mission, while ensuring the sustainable returns necessary to meet pension obligations.
It’s a big task, but it all starts with the clearly articulated strategy of our Climate Action Plan.
It’s a prime example of a church pension fund leading the way on climate investment.
I hope some of what I’ve laid out for you today will be helpful as you put together your own investment and engagement strategies.
Finally, let’s talk about divestment
The stakes are enormous and the work is complex. There are no simple answers. But we can do it.
We don’t divest readily. It is never about “sending a message” or “punishing” companies for their actions. Divestment is utilized only when consistent with our fiduciary duty and where the specific risk posed by a company’s failure to develop any meaningful climate transition plan is extreme. We take the time to develop a risk assessment framework for each specific industry, evaluate each company that meets our threshold criteria, engage directly with many of them, and analyze their responses. Then, for those that fail to meet our minimum standards, we conduct a financial analysis and obtain an outside fiduciary opinion to ensure that divestment will not harm the Fund. Since 2019, we have evaluated 83 fossil fuel producers for their transition readiness, and have divested from a total of 55 thermal coal mining, oil sands and shale oil and gas companies that failed to demonstrate viable transition strategies. Next, we will assess integrated oil and gas companies, including the oil and gas supermajors such as Exxon, Chevron, Shell and BP.
The more investors speak with one voice, the more effective we will be. Working together, the power of our Funds can move companies, nations, and the world, toward a more equitable, more sustainable, more economically secure future. I’ll leave you with more words from Pope Francis: “Future generations will never forgive us if we miss the opportunity to protect our common home.” For my part, as New York’s Comptroller, I will continue to seize that opportunity – by taking the right actions for our planet, and employing the best long-term investment strategies for our pensioners, present and future. Each of you, and the many other organizations that GreenFaith represents, have a critical role to play in this endeavor. Thank you, and good luck all.