Gov. Phil Murphy yesterday conditionally vetoed legislation () that would force the state to divest public-pension funds from entities that avoid paying for the cleanup of federal Superfund waste sites by filing for bankruptcy.
Instead, the governor recommended giving the State Investment Council that option, among others, to correct behavior when companies in which the pension system has invested behave poorly.
In his CV message, Murphy cited a recent instance when the council convinced mortgage lenders to suspend foreclosures in Puerto Rico in the wake of Hurricane Maria. “Had divestiture been mandated, these lenders might still be foreclosing on devastated families,’’ the governor said.
Murphy also conditionally vetoed another bill () that would have prohibited the state from investing in entities engaged in mortgage foreclosures in Puerto Rico. He recommended setting up a similar range of options for the SIC to deal with the problem as he suggested with the proposed prohibition against investing in companies that shirk responsibility for cleaning up polluted sites.
The bill had been spurred by efforts by a state-owned Argentinian oil company and its subsidiaries that critics asserted sought to avoid paying more than $1 billion to clean up the former Diamond Alkali Superfund site and dioxin pollution in sediments of the Passaic River.
The company, YPF S.A., has been accused of draining Maxus Energy, a subsidiary, of its assets to bring bankruptcy proceedings to prevent the company from paying for a $1.4 billion cleanup in the river. The contamination was traced back to a former manufacturer of Agent Orange in the Ironbound section of Newark. YPF acquired Maxus long after the plant shut down, but was held liable under the sweeping extent of the Superfund law.
Murphy backed a strong response to companies trying to evade their Superfund obligations. “However, while I agree that divestiture is an appropriate penalty in certain instances — particularly when the investment is liquid in nature — I do not believe it should be the only available response when companies in which the state has invested behave poorly,’’ he said.
Giving the State Investment Council a variety of options to identify and correct the offending behavior would be a more effective and legally defensible approach, according to the governor. He recommended formally instituting a so-called environmental, social, and governance (ESG) policy to afford the council a number of negotiating tools to influence a company’s behavior.
But the governor’s action drew criticism from environmentalists and a lawmaker.
“Gov. Murphy’s conditional veto weakens the purpose of the bill by giving the State Investment Council options. Will those options lead to divestment? Will those polluters pay to clean up the river or slip off the hook?’’ questioned Jeff Tittel, director of the New Jersey Sierra Club. “We need to hold polluters accountable by divesting, period.’’
Sen. Teresa Ruiz, an Essex County Democrat who sponsored the bill dealing with prohibiting investing in entities foreclosing on properties in Puerto Rico, called the governor’s action unfortunate in a statement issued with fellow-Democrat Sen. Nilsa Cruz-Perez.
“These changes not only would obstruct swift and decisive action, it arbitrarily and unnecessarily adds another level of oversight,’’ the legislators said. “These proposed changes weaken the legislative intent of this bill and disables any future divesture legislation by putting the authority to divest in the hands of a group of non-elected individuals.’’