The New York State Common Retirement Fund (Fund) is evaluating 42 publicly traded shale oil and gas companies to determine if they are prepared for the transition to a low-carbon economy, New York State Comptroller Thomas P. DiNapoli, trustee of the third largest public pension plan in the country, announced today. The Fund also restricted investments in five more coal producers, adding those companies to the list of 22 that the Fund divested from in 2020.
“A low-carbon economy is already becoming a reality and companies that aren’t prepared for it could pay a heavy financial cost,” DiNapoli said. “Shale oil and gas companies face significant economic, environmental and regulatory challenges. We will carefully review these companies and may restrict investments in those that do not have viable plans to adapt.”
Today’s actions come as part of DiNapoli’s comprehensive Climate Action Plan to mitigate investment risks posed by climate change and ultimately transition the Fund’s investment portfolio to net zero greenhouse gas emissions by 2040.
Review of Shale Oil and Gas Companies
Shale oil and gas companies under review are those that derive over 10% of their revenue from crude oil and gas production from shale. Included on the list are major energy companies including Marathon Oil Corp., ConocoPhillips and Hess Corp.
Shale rock deposits containing reserves of crude oil and natural gas are found in the United States and in other regions around the world. Companies that produce oil and gas from shale face financial risks from diminishing cost competitiveness, increasing climate regulation, and declining fossil fuel demand.
The Fund has requested that each of the 42 shale oil and gas companies provide additional information, within 60 days, to demonstrate how they are developing, adopting, or implementing low-carbon transition strategies.
DiNapoli also announced the Fund would restrict investments in the following coal producers: New Hope Corp., PT Indo Tambangraya Megah Tbk, Semirara Mining and Power Corp., Shanxi Coking Coal Energy Group Co. and Whitehaven Coal Ltd.
The Fund will not directly purchase or directly hold debt or equity securities, or invest through an actively managed account or vehicle, in these coal companies, and approximately $1.8 million in such securities currently held by the Fund will be sold in a prudent manner and timeframe.
This follows DiNapoli’s 2020 review of coal companies that led to divestment from 22 firms that failed to demonstrate transition readiness. The Fund annually reviews the universe of companies that derive 10% of their revenues from thermal coal mining and these additional companies did not demonstrate transition readiness.
Earlier this year, the Fund announced it would restrict investments in seven oil sands companies after conducting its initial transition readiness assessment.
Background on DiNapoli’s Climate Investment Actions
Since taking office in 2007, DiNapoli has been recognized as a global leader for his efforts to protect the Fund’s investments, address material risks from climate change and pursue sustainable investment opportunities for the Fund. In 2019, DiNapoli released a Climate Action Plan, a multi-faceted strategy that includes a goal of committing $20 billion to sustainable investments, dedicated staff to pursue climate solution investments, and minimum standards for portfolio companies that will inform engagements, investments and potential divestment decisions. Building on the Climate Action Plan’s solid foundation, in December 2020, DiNapoli announced the Fund has adopted a goal to transition its portfolio to net zero greenhouse gas emissions by 2040.
Background on New York State Common Retirement Fund
The New York State Common Retirement Fund is the third largest public pension fund in the United States with assets of approximately $254.8 billion as of March 31, 2021. 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. It has consistently been ranked as one of the best managed and best funded plans in the nation.