Campaign Continues Against State Pension Investment in Fossil Fuels

John Reitmeyer | September 20, 2019 | Budget
DivestNJ Coalition has been urging officials to get rid of holdings in oil and gas companies, calling them too risky in the era of climate change

Credit: DivestNJ Coalition
Members of the DivestNJ Coalition rallied last month before a meeting of the New Jersey State Investment Council.
For more than a year, a coalition of environmental organizations has been urging state pension officials to get rid of investments in fossil-fuel companies. So far, the calls by the DivestNJ Coalition have largely fallen on deaf ears, but the group’s members are not close to giving up.

When the New Jersey State Investment Council (SIC) holds its next public meeting in Trenton next week, coalition members will once again be there to make the case that fossil-fuel holdings have become too risky in the era of climate change.

“It doesn’t make any sense to be investing in a sector that is in decline with an outlook that is very bleak,” said Tina Weishaus, a Highland Park resident who serves as the group’s spokeswoman.

New Jersey’s $75 billion public-worker pension system covers the retirements of an estimated 770,000 current and retired workers; the pension funds are managed on a regular basis by the Department of Treasury’s Division of Investment under policies set in state law and by the SIC.

While pension-fund managers have a fiduciary responsibility to maximize returns for beneficiaries, lawmakers have at times prohibited specific investments to prevent public-worker funds from being used to support certain activities (including, most recently, banning investment in companies that have decided to boycott Israel to protest its treatment of Palestinians). In the wake of recent deadly mass shootings in the United States, Gov. Phil Murphy and some New Jersey lawmakers have also called for the divestment of any stakes in companies that manufacture firearms or ammunition.

The push to divest all fossil-fuel investments held by major institutional investors such as pension funds and university endowments began about a decade ago. It has picked up steam in recent years amid growing concerns about climate change and the role that fossil fuels have played in rising temperatures and sea levels. Last year, New York City Mayor Bill de Blasio announced a goal of divesting his city’s pension funds of fossil-fuel investments by 2022. More recently, the University of California announced it would be divesting all fossil-fuel investments from both its endowment and pension funds.

Fossil-fuel firms looking at divestment impact

Weishaus, who has become a fixture at New Jersey SIC meetings over the last year, pointed to that national momentum as she made the case in a recent interview for full fossil-fuel divestment at places like Rutgers University and for the state pension system. In fact, she said fossil-fuel companies are starting to cite the impact of the divestment movement in their own corporate filings.
“At first, it was seen as a symbolic action to stigmatize the fossil-fuel companies,” Weishaus said. “But it’s become something that’s much more powerful.”

Earlier this year, SIC announced during a public meeting the results of an in-house study of what could happen if officials decided to go “fossil-fuel free” at the activists’ urging. The review acknowledged that “business risk may support a transition to renewable energy over a long-term investment horizon.” But it also determined that even as renewable energy sources and electric vehicles grow in popularity, demand for fossil fuels isn’t projected to peak until “around the year 2040,” suggesting fossil-fuel investments would likely continue to be profitable.

The state will continue investing in companies tied to the fossil-fuel industry as pension officials in May this year cited their overarching fiduciary responsibility to maximize investment returns for beneficiaries. But they also recommended that SIC should consider putting in place guidelines that would let pension officials begin to engage more regularly with the executives of companies that pension funds are invested in to encourage more disclosure of climate-change policies and greenhouse-gas and emissions reports. Working with other shareholders to encourage reduced emissions was another recommendation.

While Weishaus was happy to see pension-fund managers take her group’s concerns seriously, she also said members will continue making the public push for full divestment, including during the SIC meetings. And she pointed to recent events like Hurricane Dorian, and this summer’s temporary closing of Lake Hopatcong, New Jersey’s largest lake, due to potentially toxic algal blooms, as examples of the continuing impact of climate change.

“I do think when people are directly affected, when businesses are directly affected . . . I think it changes people’s consciousness, it brings it closer to home,” Weishaus said.

Backing new legislation

Among the groups that make up the DivestNJ coalition are the Sierra Club and Environment New Jersey, also the climate-change focused organization 350NJ, where Weishaus serves on the steering group. In addition to pressing pension officials for policy changes, the DivestNJ coalition has endorsed legislation introduced last year in both the Assembly and Senate that would require the state pension system as a matter of law to get rid of any holdings in the top 200 largest publicly traded fossil-fuel companies such as those selling oil and gas.

If enacted, the bill would force the hand of pension-fund managers by requiring 100 percent divestment within two years. It could also save the pension system — which is one of the nation’s worst-funded public-worker retirement plans — much-needed cash over the long term, Weishaus said.

“It’s a financial decision,” she said. “It’s a bad investment at this point.”