|SAME AS||SAME AS S04596-A|
|COSPNSR||Mosley, 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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NEW YORK STATE ASSEMBLY
MEMORANDUM IN SUPPORT OF LEGISLATION
submitted in accordance with Assembly Rule III, Sec 1(f)
BILL NUMBER: A3712A SPONSOR: Ortiz
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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STATE OF NEW YORK ________________________________________________________________________ 3712--A 2017-2018 Regular Sessions IN ASSEMBLY January 30, 2017 ___________ Introduced by M. of A. ORTIZ, MOSLEY, FAHY, SIMON, THIELE, GOTTFRIED, SEAWRIGHT, O'DONNELL, STECK, ENGLEBRIGHT, HARRIS, CARROLL, GLICK, COLTON, BLAKE, NIOU, JAFFEE, RIVERA, DAVILA, RODRIGUEZ, ZEBROWSKI, 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. LBD05953-03-8A. 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-annuallyA. 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.