Bill Text: NY S00899 | 2023-2024 | General Assembly | Introduced


Bill Title: Establishes the teachers' fossil fuel divestment act; requires the New York state teachers' retirement system to divest the retirement system of any stocks, securities, equities, assets, or other obligations of corporations or companies included on an exclusion list of coal producers and oil and gas producers.

Spectrum: Partisan Bill (Democrat 26-0)

Status: (Introduced) 2024-01-03 - REFERRED TO CIVIL SERVICE AND PENSIONS [S00899 Detail]

Download: New_York-2023-S00899-Introduced.html



                STATE OF NEW YORK
        ________________________________________________________________________

                                           899

                               2023-2024 Regular Sessions

                    IN SENATE

                                     January 9, 2023
                                       ___________

        Introduced  by  Sens.  BRISPORT, ADDABBO, BAILEY, BROUK, CLEARE, COMRIE,
          COONEY, GIANARIS, HARCKHAM, HINCHEY, HOYLMAN, JACKSON,  KRUEGER,  MAY,
          MAYER,  MYRIE,  PARKER,  RAMOS,  RIVERA,  SALAZAR, SANDERS, SEPULVEDA,
          SERRANO, SKOUFIS -- read twice and ordered printed, and  when  printed
          to be committed to the Committee on Civil Service and Pensions

        AN ACT to amend the education law, in relation to requiring the New York
          state  teachers'  retirement system to divest the retirement system of
          any investments in corporations or companies included on an  exclusion
          list of coal producers and oil and gas producers

          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  "teachers'
     2  fossil fuel divestment act".
     3    §  2. Legislative findings. 1. a. Climate change is a real and serious
     4  threat to the health, welfare, and prosperity of all  New  Yorkers,  now
     5  and  in  the  future.  Maintaining  the status quo of fossil fuel energy
     6  production will lead to catastrophic results.
     7    b. In July 2019, New York state  passed  the  climate  leadership  and
     8  community  protection act and committed to reducing statewide greenhouse
     9  gas emissions by eighty-five percent by 2050 and net zero  emissions  in
    10  all  sectors  of  the  economy.  Other  cities and states have chosen to
    11  pursue similar paths to reduce greenhouse gas emissions.
    12    c. The threat of climate change, and the transformation of the  global
    13  energy system that will be necessary to mitigate it, will have a serious
    14  negative  impact on investors whose assets are not aligned with the goal
    15  of keeping the global average temperature  increase  below  1.5  degrees
    16  Celsius,  as determined by the United Nations Intergovernmental Panel on
    17  Climate Change.
    18    d. There are no existing legal or fiduciary duties  that  require  New
    19  York  state's pension funds to invest in energy sources that are harmful
    20  to the environment, or in contradiction to  the  goals  of  the  climate

         EXPLANATION--Matter in italics (underscored) is new; matter in brackets
                              [ ] is old law to be omitted.
                                                                   LBD03486-01-3

        S. 899                              2

     1  leadership  and  community protection act. Rather, there are alternative
     2  investments that are available to our pension funds that do not  present
     3  such harms.
     4    e.  Many  cities  and  states  have  recognized the harmful effects of
     5  pension and investment funds investing in fossil fuels and have  commit-
     6  ted to divesting those funds. Over 1,100 institutional investors repres-
     7  enting  more than $11 trillion in holdings have chosen to pursue full or
     8  partial divestment from fossil fuel producers, including  the  New  York
     9  city employees retirement system, the endowment and pension funds of the
    10  University  of  California  system,  and  the  sovereign wealth funds of
    11  Norway and Ireland.
    12    2. a. Continued investment in fossil fuel producers poses unacceptable
    13  risks to the people of the state of New York, as well as  the  long-term
    14  sustainability of the New York state teachers' retirement system.
    15    b. Investment in dangerous and harmful fossil fuels is not mandated by
    16  law.  The  New  York  state  common retirement fund, consistent with its
    17  fiduciary duties, has committed to complete reviews of all  fossil  fuel
    18  investments by 2025 and to divest from companies that fail to meet mini-
    19  mum  standards.  It  has also set a precedent by choosing to divest from
    20  certain industries in the past due to the moral  implications  of  their
    21  business  models, including private prisons, firearms manufacturers, and
    22  companies doing business with Sudan, all while complying with the  comp-
    23  troller's fiduciary obligations.
    24    c.  New  York  owes  duties  to  its residents, and the New York state
    25  teachers' retirement system owes duties to future  beneficiaries.  These
    26  duties  can and should reasonably include considerations of human inter-
    27  ests, quality of  life,  public  safety  and  security,  and  ultimately
    28  require  a  shift  away  from  fossil  fuels to help mitigate the future
    29  adverse effects of climate change.
    30    d. According to the U.S. Department of Labor's  interpretive  bulletin
    31  2015-1,  environmental  issues  "may  have  a direct relationship to the
    32  economic value of the plan's investment, and are not  merely  collateral
    33  considerations  or tie-breakers, but rather are proper components of the
    34  fiduciary's primary analysis of the economic merits of competing invest-
    35  ment choices."
    36    e. Attempting to profit from investments in companies  whose  business
    37  models,  public  relations campaigns, and lobbying efforts not only fail
    38  to comply with New York's statutory climate  goals,  but  also  put  the
    39  stability  of  our  society  and  the safety of our citizens at risk, is
    40  neither morally acceptable nor  in  compliance  with  the  legislature's
    41  responsibility  to  protect the financial security of current and future
    42  pension beneficiaries.
    43    f. Currently, the majority of fossil fuel producers are not  adjusting
    44  their  business  models to take into account the changing energy market,
    45  investing billions of dollars in exploring and extracting new  reserves,
    46  creating  stranded  asset  risk and the potential for rapid, unexpected,
    47  and significant loss of value.
    48    g. Attempting to beat the market by holding  these  investments  until
    49  the  last  possible  moment is a high-risk strategy that could result in
    50  the loss of investment principal. In the words  of  the  decarbonization
    51  advisory panel for the New York state common retirement fund, "being too
    52  early  in  the avoidance of the risk of permanent loss is much less of a
    53  danger than being too late."
    54    h. In addition to the risks regarding retirement  security,  continued
    55  investment in the fossil fuel industry is counterproductive to the goals
    56  set forth in the climate leadership and community protection act.

        S. 899                              3

     1    §  3.  The  education  law is amended by adding a new section 508-b to
     2  read as follows:
     3    §  508-b.  Fossil  fuel  divestment.  1.  Definitions. As used in this
     4  section:
     5    a. "coal producer" means any corporation or company, or any subsidiary
     6  or parent of any corporation or company or partnership  or  other  legal
     7  entity, that derives at least ten percent of annual revenue from thermal
     8  coal  production,  or  accounts  for  more  than  one  percent of global
     9  production of thermal coal, or whose reported coal reserves contain more
    10  than 0.3 gigatons of potential carbon dioxide emissions;
    11    b. "exclusion list" means the list created pursuant to paragraph a  of
    12  subdivision two of this section;
    13    c.  "oil  and  gas  producer" means any corporation or company, or any
    14  subsidiary or parent of any corporation or  company  or  partnership  or
    15  other  legal  entity,  that  derives  at  least twenty percent of annual
    16  revenue from oil or gas  production,  or  accounts  for  more  than  one
    17  percent  of global oil or gas production, or whose reported combined oil
    18  and gas reserves contain more than  0.1  gigatons  of  potential  carbon
    19  dioxide emissions;
    20    d.  "oil  or  gas production" means exploration, extraction, drilling,
    21  production, refining, processing, or distribution activities related  to
    22  oil or gas;
    23    e.  "thermal  coal production" means mining, transport, processing, or
    24  exploration activities related to thermal coal;
    25    f. "oil and gas equipment, services, transportation and storage" means
    26  services, transportation or storage activities related to oil  and  gas;
    27  and
    28    g.  "index  fund"  means  a  passive investment strategy that tracks a
    29  market index.
    30    2. Fossil fuel company exclusion list. a. Within  six  months  of  the
    31  effective  date  of  this  section, the retirement board shall create an
    32  exclusion list of all coal producers and oil and gas producers in  whose
    33  stocks, securities, equities, fixed income, assets, or other obligations
    34  the retirement system has any monies or assets directly invested.
    35    b.  Upon  completion  of the exclusion list, it shall be made publicly
    36  available and a copy shall be sent to the  temporary  president  of  the
    37  senate and the speaker of the assembly.
    38    c.  The  retirement board shall submit notification to any corporation
    39  or company that has been included in the exclusion list  informing  them
    40  of  their  inclusion  on  such list, as well as the requirements of this
    41  section.
    42    d. At the retirement board's discretion, but no later than  two  years
    43  after  the completion of the exclusion list, and no less frequently than
    44  biennially thereafter, the retirement board shall update  the  exclusion
    45  list  to  remove  any  corporation  or  company that is no longer a coal
    46  producer or an oil and gas producer and add any corporation  or  company
    47  necessary to comply with paragraph a of this subdivision.
    48    3.  Removal  from  the  exclusion  list.  a. At any time following the
    49  publication of the exclusion list, any corporation or  company  included
    50  in  the list may submit to the retirement board a request for removal on
    51  the basis of clear and convincing evidence that they are not currently a
    52  coal producer or an oil and gas producer as defined in  subdivision  one
    53  of this section.
    54    b.  Upon  satisfaction  that  a  corporation  or  company  has met the
    55  requirements of paragraph a of this subdivision,  the  retirement  board
    56  shall  remove  such  corporation  or company from the exclusion list and

        S. 899                              4

     1  provide a written explanation for such removal to the  temporary  presi-
     2  dent of the senate and the speaker of the assembly.
     3    4.  Compliance with fiduciary duties. a. Nothing in this section shall
     4  require a board to take action as described in this section  unless  the
     5  board determines in good faith that the action described in this section
     6  is consistent with the fiduciary responsibilities of the board under the
     7  New  York  state  constitution. Any new investments must comply with the
     8  fiduciary obligations and  the  prudent  investor  rule  as  defined  by
     9  section 11-2.3 of the estates, powers and trusts law.
    10    b.  No  private right of action shall be available against the retire-
    11  ment system, any of its employees, or any present,  future,  and  former
    12  board  member  of  the retirement system for divesting retirement system
    13  assets pursuant to this section in good faith.
    14    c. No private right of action shall be  available  against  the  state
    15  pursuant to this section.
    16    5. Divestment. a. Commencing one year after the effective date of this
    17  section, and in accordance with sound investment criteria and consistent
    18  with  its fiduciary obligations, the retirement board and any investment
    19  managers under contract with the retirement system shall: (i) divest the
    20  retirement system of any stocks, securities, equities, assets, or  other
    21  obligations  of corporations or companies on the exclusion list in which
    22  any monies or assets of the retirement system  are  invested;  and  (ii)
    23  cease  new  investments of any monies or assets of the retirement system
    24  in any stocks, securities, or other obligations of  any  corporation  or
    25  company that is a coal producer or oil and gas producer as defined here-
    26  in.
    27    b.  Divestment from oil and gas producers pursuant to this subdivision
    28  shall be completed no later than two years from the  effective  date  of
    29  this  section.  Divestment  from  oil  and gas producers returned to the
    30  exclusion list pursuant to paragraph  c  of  subdivision  four  of  this
    31  section  shall  be  completed  no  later than two years from the date of
    32  return to the exclusion list.
    33    c. Divestment from coal producers pursuant to this  subdivision  shall
    34  be  completed  no  later  than  one year from the effective date of this
    35  section.  Divestment from coal producers returned to the exclusion  list
    36  pursuant  to  paragraph  c  of  subdivision two of this section shall be
    37  completed no later than one year from the date of return to  the  exclu-
    38  sion list.
    39    d.  Divestment from private equity and private debt investments pursu-
    40  ant to this subdivision  shall  occur  expeditiously  in  a  good  faith
    41  attempt  to  comply  with  the  provisions of paragraphs b and c of this
    42  subdivision, but no later than five years from  the  effective  date  of
    43  this section.
    44    e.  The retirement system shall have the discretion to divest from any
    45  other entities that it in good faith believes are directly or indirectly
    46  financing oil and gas producers, or coal producers, regardless of wheth-
    47  er such entity otherwise meets the criteria of this subdivision.
    48    6. Limitations on indirect investment. Notwithstanding any  provisions
    49  in this section to the contrary, and in accordance with sound investment
    50  criteria  and  consistent with its fiduciary obligations, the retirement
    51  board shall be permitted to invest in index funds if the board is satis-
    52  fied on reasonable grounds and in good faith that such indirect  invest-
    53  ment vehicle does not have in excess of one percent of its assets, aver-
    54  aged annually, directly or indirectly invested in coal producers and oil
    55  and gas producers.

        S. 899                              5

     1    7.  Reporting. a. Commencing one year after the effective date of this
     2  section and annually thereafter  the  retirement  board  shall  issue  a
     3  report  to  the temporary president of the senate and the speaker of the
     4  assembly and shall make such report publicly  available,  outlining  all
     5  actions taken to comply with this section.
     6    b.  To  the  extent  that  the retirement system has remaining private
     7  equity or private debt investments in any oil and gas producers, or coal
     8  producers, the retirement board shall  prominently  make  note  of  such
     9  investments  and  all  attempts  that  have  been  made to expeditiously
    10  complete its divestment obligations to date.   The board  shall  provide
    11  public  notice  of  this  annual  report  and  an opportunity for public
    12  comment on the retirement system's divestments pursuant to this  act  of
    13  at least sixty days.
    14    § 4. This act shall take effect immediately.
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