Editorial: N.Y.'s big green move
Dec 10, 2020
The time is coming when the United States and much of the rest of the world will move beyond fossil fuels to more sustainable ways of satisfying humanity’s massive energy needs. A move by New York Comptroller Thomas DiNapoli this week may well help make that change come sooner.
Mr. DiNapoli, the sole trustee of New York’s $226 billion Common Retirement Fund, announced Wednesday that the fund’s portfolio will transition to net-zero greenhouse gas emissions by 2040. And in the next five years, it will complete a review of its investments in the energy sector, and potentially divest itself of holdings in companies that fail to meet minimum standards of progress in preparing for a cleaner future.
This is not some feel-good political move. It’s an acknowledgment from the nation’s fourth-largest pension fund and the world’s 14th biggest as of 2019 that companies based on fossil fuels are going to be poor investments in the not-too-distant future. And such a statement from a large-scale investor has the potential to be a self-fulfilling prophecy of its own. It can lower other investors’ confidence in fossil-fuel stocks and depress companies’ values, in turn making them even less attractive investments.
But it can be, for some companies at least, as much an incentive as a threat. Any energy company that didn’t have its head in the sand in recent years would have seen that public concern and consensus about the dangers of global warming have been growing, and that governments around the world have been increasingly committing to reduce carbon emissions under the Paris Climate Accord as well as their own domestic initiatives. New York state, for example, last year passed the Climate Leadership and Community Protection Act, which calls for the state to get 70 percent of its energy from renewable sources by 2030, achieve 100 percent zero-emission electricity by 2040 and reduce greenhouse gas emissions overall by 85 percent by 2050.
That was an important signal, but in tying pension investments to corporate actions, plans and policies, Mr. DiNapoli’s timetable puts companies on a notice that surely counts most of all: financial. It goes further than legislative divestment bills proposed. And it provides a window, five years at most, for oil, gas and coal companies to start shifting their focus and capital investments to low-carbon and green technologies and weaning themselves and their customers off fossil fuels.
This is a breakthrough for climate change activists who have been pressing the comptroller to use the pension fund’s clout more aggressively. Mr. DiNapoli has long preferred to remain a major shareholder in energy companies in order to effect change from within, and he says he still intends to do that. But this latest move ups the stakes considerably with a crystal-clear message to energy companies: Adapt to a green economy now, or go the way of the dinosaurs in a future that just got that much closer.