Companies to Explain How They Can Adapt to Meet Lower Carbon Future
Under pressure from the increasingly activist NYS Common Retirement Fund, three U.S. energy companies agreed to detail how they will be impacted by global efforts to achieve the Paris Agreement’s goals and how they can adapt to a lower carbon future. As a result, the NY Retirement Fund has withdrawn the shareholder requests it filed with DTE Energy, Dominion Energy and Southwestern Energy.
NYS Comptroller Thomas DiNapoli is the trustee for the Fund. He has been pushing for investments that support his view of the environment and gender equality and threatening companies that don’t follow his ideal with hasty sales of the shares held by NYS Fund.
He explains, “Corporations need to recognize that a transition to a lower carbon economy is already underway and their future success demands adjusting to this new reality. We will continue to monitor and engage with these companies as they report on their efforts to reduce carbon emissions.”
The Fund’s shareholder resolutions called on the companies to assess the impact of regulatory and technological efforts to mitigate climate change and to explain how they could align their businesses to the global greenhouse gas (GHG) reduction goals defined by the Paris Climate Agreement.
The Paris agreement sets a goal to limit the increase in global average temperature to well below 2°C above pre-industrial levels and pursue efforts to limit temperature increases to 1.5°C. In order to meet the 2°C goal, climate scientists estimate that a 55 percent reduction in GHG emissions globally is needed by 2050 (relative to 2010 levels), entailing a United States target reduction of 80 percent.
DiNapoli’s Sustainable Investment Program
Since taking office in 2007, DiNapoli has been in the fight against “climate change,” addressing risks and opportunities for the Fund’s investments in the context with environmentally sustainable programs. At his direction, the Fund developed the Sustainable Investment Program. The low emissions index is one of the pieces of the program’s approach to managing investment risk posed by climate change.
Sustainable Investing: DiNapoli’s commitments to sustainable investment, currently valued at more than $7 billion, integrate key environmental, social and governance (ESG) principles into the Fund’s investment decisions, including:
$4 billion for the low emissions index;
$3 billion in sustainable investments across asset classes, including: $400 million with Generation Asset Management; $300 million with the Rockefeller Asset Management Global Sustainability and Impact Strategy; and $150 million with the Rise Impact Fund;
LEED Gold real estate investments, World Bank Green Bonds and private equity investments such as Invenergy, developers of a wind farm in Western New York;
ESG risk assessments for all new investments; and annual reviews of ESG oversight of existing investments with an annual carbon footprint analysis of the Fund’s public equity portfolio (16 percent lower overall emissions profile relative to its benchmark in 2017); and
Continuing to seek large-scale sustainable investment opportunities around the globe that meet the Fund’s risk and return requirements.
Active Ownership: DiNapoli uses the Fund’s mammoth status as a large long-term investor and its shareholder voting power to protect investments and motivate companies by calling on them to address climate change risks they face, report on and reduce their GHG emissions, and acknowledge business opportunities and risks in the low carbon economy.
Over the last decade, the Fund has:
Filed more than 120 climate change-related shareholder resolutions and reached 43 agreements with portfolio companies to analyze climate risks, set GHG reduction targets and renewable energy and energy efficiency goals, attempted to prevent deforestation, published sustainability reports, and encourage the appointment of directors with environmental expertise.
Won shareholder support for ExxonMobil, Duke Energy and others to examine how the worldwide effort to meet the goals of the Paris Agreement will impact their businesses;
Written to more than 300 companies in the low emissions index, calling on them to publicly disclose their emissions data. This engagement spurred shareholder proposals in 2018 calling on companies to adopt targets for reducing their greenhouse gas emissions;
Persuaded 70 companies to disclose their carbon emissions data over the last two years; and
Joined forces with investors representing trillions of dollars in engaging corporations to accelerate and expand emissions reductions, enhance risk disclosures, and implement sustainable business practices, including PRI, CDP’s Carbon Action, the Climate Action 100+, and CERES, where DiNapoli has served on the Board of Directors since 2011.
The NYS Common Retirement Fund is the third largest public pension fund in the United States with estimated assets of $209.1 billion as of Dec. 31, 2017. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. The Fund’s fiscal year ended March 31, 2018.