By Richard Brower
The politicization of pensions continues plaguing our state. In a misguided effort to fight climate change, State Sen. Liz Krueger introduced Senate bill 2126, the Fossil Fuel Divestment Act, earlier this year.
This prompted an open letter from New York Comptroller Thomas DiNapoli, urging Krueger to reconsider this legislation on the basis that it limits his fiduciary responsibility to manage the state pension funds for the sole interest of its beneficiaries. DiNapoli is right – and the Legislature shouldn’t limit his ability to do his job.
As a lifelong New Yorker and retired officer of the Fire Department of New York, I believe in empowering fiduciaries to make the best decisions for the funds without the influence of politics. By cutting investments that have generated more than $4 billion over the past decade, the Senate bill would force DiNapoli to abdicate his fiduciary responsibility, which stands independent of political and social opinions.
During an April 2019 hearing on the bill, New York State Common Retirement Fund’s interim chief investment officer, Anastasia Titarchuk, explained the benefits of the fund having a strong diversification strategy – which also includes $10 billion in its sustainable investment program. She called divestment a “blunt instrument that does not actually address the greatest [climate change] risks … ”
New York job opportunities will also suffer if the state divests. In 2018, the fossil fuel sector grew by 4.9% and is projected to grow another 3% in 2019. New York could see economic gains between $2.6 and $5 billion from liquefied natural gas exports alone.
Beyond divestment posing a threat to New York’s workforce and retirees, it hasn’t been proved that it fights climate change. An issue brief from the Institute for Pension Fund Integrity (for which I am an advisory board member) explores this topic, showing that divestment doesn’t necessarily force a company to change its actions.
Pension funds have begun to realize that the costs of divestment are not worth the political statement. Recently, New York City police and fire pension funds opted against participating in Mayor Bill de Blasio and City Comptroller Scott Stringer’s divestment plans. And CalPERS voted to oppose legislation which would require divestment from private prison companies.
New York must recognize the futility of divestment and its ineffectiveness for urging change. It only hurts retirees and local economies. Fellow pensioners, retirees and taxpayers must demand separation between political opinions and public pension management. Politicians should not jeopardize our hard-earned retirement and a healthy economy because of a political agenda.
Richard Brower is a former vice chairman of the New York City Fire Department’s Pension Fund.