A08011 Summary:

BILL NO    A08011A

SAME AS    SAME AS S05873

SPONSOR    Ortiz

COSPNSR    

MLTSPNSR   

Amd S423, R & SS L

Relates to limitations on investments of public pension funds.
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A08011 Actions:

BILL NO    A08011A

06/04/2015 referred to governmental employees
06/23/2015 amend (t) and recommit to governmental employees
06/23/2015 print number 8011a
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A08011 Votes:

There are no votes for this bill in this legislative session.
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A08011 Memo:

BILL NUMBER:A8011A

TITLE OF BILL:  An act to amend the retirement and social security
law, in relation to limitations on investments of public pension funds

PURPOSE:

To direct the State Comptroller to divest the New York State Common
Retirement Fund from companies engaged in the production of fossil
fuels.

SUMMARY OF PROVISIONS:

Section 1: The act is named the "fossil fuel divestment act."

Section 2: Amends the Retirement and 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 by January 1, 2020.

The bill 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.

The bill 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
catastrophe. 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
irreversible climate change. In order to stay below 21 C, 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 overwhelming 2,795 Gt of potential emissions, not including
as-yet undiscovered 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 $5.12 billion in public pension money in
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 interest 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 changing 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 President 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 loss 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 80% of worldwide
coal reserves, including 90% 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 policymaking, and the time for action is now.

FISCAL IMPLICATIONS:

Undetermined

EFFECTIVE DATE:

This act shall take effect immediately
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A08011 Text:

                           S T A T E   O F   N E W   Y O R K
       ________________________________________________________________________

                                        8011--A

                              2015-2016 Regular Sessions

                                 I N  A S S E M B L Y

                                     June 4, 2015
                                      ___________

       Introduced  by M. of A. ORTIZ -- read once and referred to the Committee
         on Governmental  Employees  --  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    S 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    S 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
   20  of investments and shall have served, or shall be serving, as  a  senior
   21  officer  or  member of the board of an insurance company, banking corpo-
   22  ration or other financial or investment organization  authorized  to  do
   23  business  in the state of New York. The committee shall advise the comp-
   24  troller on investment policies relating to  the  monies  of  the  common

        EXPLANATION--Matter in ITALICS (underscored) is new; matter in brackets
                             [ ] is old law to be omitted.
                                                                  LBD11177-02-5
       A. 8011--A                          2

    1  retirement  fund  and  shall  review,  from time to time, the investment
    2  portfolio of the fund and make such recommendations  as  may  be  deemed
    3  necessary.
    4    (B) The comptroller shall appoint a separate mortgage advisory commit-
    5  tee,  with  the advice and consent of the investment advisory committee,
    6  to review proposed mortgage and real estate investments  by  the  common
    7  retirement  fund. In making investments, as authorized by law, the comp-
    8  troller shall be guided by policies established by each  committee  from
    9  time  to  time; and, in the event the mortgage advisory committee disap-
   10  proves a proposed mortgage or real estate investment, such shall not  be
   11  made.
   12    (C)  No officer or employee of any state department or agency shall be
   13  eligible for  membership  on  either  committee.  Each  committee  shall
   14  convene  periodically  on  call  of  the  comptroller, or on call of the
   15  chairman. The members of each committee shall be entitled to  reimburse-
   16  ment  for  their  actual  and  necessary  expenses  but shall receive no
   17  compensation for their services.
   18    3. (A) NOTWITHSTANDING ANY PROVISION OF LAW TO THE CONTRARY, THE COMP-
   19  TROLLER SHALL NOT HAVE THE POWER TO INVEST THE AVAILABLE MONIES  OF  THE
   20  COMMON  RETIREMENT  FUND  IN ANY STOCKS, DEBT OR OTHER SECURITIES OF ANY
   21  CORPORATION OR COMPANY, OR ANY SUBSIDIARY, AFFILIATE OR  PARENT  OF  ANY
   22  CORPORATION  OR  COMPANY,  AMONG THE TWO HUNDRED LARGEST PUBLICLY TRADED
   23  FOSSIL FUEL COMPANIES, AS ESTABLISHED BY CARBON CONTENT  IN  THE  COMPA-
   24  NIES'  PROVEN  OIL,  GAS  AND  COAL  RESERVES. THE COMPTROLLER SHALL, IN
   25  ACCORDANCE WITH SOUND INVESTMENT CRITERIA AND CONSISTENT WITH HIS OR HER
   26  FIDUCIARY OBLIGATIONS, DIVEST ANY SUCH STOCKS OR OTHER SECURITIES WHETH-
   27  ER THEY ARE OWNED DIRECTLY OR HELD  THROUGH  SEPARATE  ACCOUNTS  OR  ANY
   28  COMMINGLED  FUNDS.  DIVESTMENT  PURSUANT  TO  THIS  SUBDIVISION  MUST BE
   29  COMPLETED BY JANUARY FIRST, TWO THOUSAND TWENTY, WITH THE  EXCEPTION  OF
   30  COMPANIES  ENGAGED  IN  THE  MINING,  EXTRACTION  OR PRODUCTION OF COAL,
   31  DIVESTMENT FROM WHICH MUST BE COMPLETED NO LATER THAN ONE YEAR AFTER THE
   32  EFFECTIVE DATE OF THIS SUBDIVISION.
   33    (B) THE COMPTROLLER SHALL BE PERMITTED TO CEASE DIVESTING FROM  COMPA-
   34  NIES UNDER PARAGRAPH (A) OF THIS SUBDIVISION, REINVEST IN COMPANIES FROM
   35  WHICH  IT  DIVESTED UNDER PARAGRAPH (A) OF THIS SUBDIVISION, OR CONTINUE
   36  TO INVEST IN COMPANIES FROM WHICH IT HAS NOT YET DIVESTED UPON CLEAR AND
   37  CONVINCING EVIDENCE SHOWING THAT AS A DIRECT RESULT OF SUCH  DIVESTMENT,
   38  THE  TOTAL  AND AGGREGATE VALUE OF ALL ASSETS UNDER MANAGEMENT BY, OR ON
   39  BEHALF OF, THE COMMON RETIREMENT FUND BECOMES OR SHALL BECOME: (I) EQUAL
   40  TO OR LESS THAN NINETY-NINE AND ONE-HALF PERCENT; OR  (II)  ONE  HUNDRED
   41  PERCENT  LESS FIFTY BASIS POINTS OF THE HYPOTHETICAL VALUE OF ALL ASSETS
   42  UNDER MANAGEMENT BY, OR ON BEHALF OF, THE COMMON RETIREMENT FUND  ASSUM-
   43  ING NO DIVESTMENT FROM ANY COMPANY HAD OCCURRED UNDER SAID PARAGRAPH (A)
   44  OF  THIS  SUBDIVISION.    CESSATION  OF  DIVESTMENT, REINVESTMENT OR ANY
   45  SUBSEQUENT ONGOING  INVESTMENT  AUTHORIZED  BY  THIS  SECTION  SHALL  BE
   46  STRICTLY LIMITED TO THE MINIMUM STEPS NECESSARY TO AVOID THE CONTINGENCY
   47  SET  FORTH  IN  THE PRECEDING SENTENCE. FOR ANY CESSATION OF DIVESTMENT,
   48  AND IN ADVANCE OF SUCH CESSATION, AUTHORIZED BY  THIS  SUBDIVISION,  THE
   49  COMPTROLLER  SHALL PROVIDE A WRITTEN REPORT TO THE ATTORNEY GENERAL, THE
   50  SENATE STANDING COMMITTEE ON CIVIL SERVICE AND PENSIONS, AND THE  ASSEM-
   51  BLY  STANDING COMMITTEE ON GOVERNMENTAL EMPLOYEES, UPDATED SEMI-ANNUALLY
   52  THEREAFTER AS APPLICABLE, SETTING FORTH THE REASONS  AND  JUSTIFICATION,
   53  SUPPORTED  BY  CLEAR AND CONVINCING EVIDENCE, FOR ITS DECISIONS TO CEASE
   54  DIVESTMENT, TO REINVEST OR TO REMAIN INVESTED IN FOSSIL FUEL COMPANIES.
   55    (C) WITHIN SIXTY DAYS OF THE EFFECTIVE DATE OF THIS  SUBDIVISION,  THE
   56  COMPTROLLER SHALL FACILITATE THE IDENTIFICATION OF FOSSIL FUEL COMPANIES
       A. 8011--A                          3

    1  FROM  WHICH THE COMMON RETIREMENT FUND IS REQUIRED TO DIVEST UNDER PARA-
    2  GRAPH (A) OF THIS SUBDIVISION, AND FILE A COPY OF  THIS  LIST  WITH  THE
    3  ATTORNEY  GENERAL,  THE  SENATE  STANDING COMMITTEE ON CIVIL SERVICE AND
    4  PENSIONS, AND THE ASSEMBLY STANDING COMMITTEE ON GOVERNMENTAL EMPLOYEES.
    5  ANNUALLY THEREAFTER, THE PUBLIC FUND SHALL FILE A REPORT WITH THE ATTOR-
    6  NEY  GENERAL,  THE  SENATE  STANDING  COMMITTEE  ON  CIVIL  SERVICE  AND
    7  PENSIONS, AND THE ASSEMBLY STANDING COMMITTEE ON GOVERNMENTAL  EMPLOYEES
    8  THAT INCLUDES: (I) ALL INVESTMENTS SOLD, REDEEMED, DIVESTED OR WITHDRAWN
    9  IN  COMPLIANCE  WITH  PARAGRAPH  (A)  OF  THIS SUBDIVISION; AND (II) ALL
   10  PROHIBITED INVESTMENTS FROM WHICH THE COMMON RETIREMENT FUND HAS NOT YET
   11  DIVESTED UNDER PARAGRAPH (A) OF THIS SUBDIVISION.
   12    S 3. This act shall take effect immediately.
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