NY State Senate Bill S2126A

Archive: Last Bill Status - In Senate Committee Civil Service And Pensions Committee

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In Committee
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Actions

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	Assembly Actions - Lowercase Senate Actions - UPPERCASE
Jan 08, 2020	referred to civil service and pensions
Nov 22, 2019	print number 2126a
Nov 22, 2019	amend (t) and recommit to civil service and pensions
Jan 22, 2019	referred to civil service and pensions

Bill Amendments

Original

A (Active)

Original

A (Active)

Co-Sponsors

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S2126 - Details

See Assembly Version of this Bill:: A1536
Current Committee:: Senate Civil Service And Pensions
Law Section:: Retirement and Social Security Law
Laws Affected:: Add §423-d, R & SS L
Versions Introduced in Other Legislative Sessions:: 2015-2016: S5873, A8011
2017-2018: S4596, A3712

S2126 - Summary

Limits investments of public pension funds in fossil fuel companies.

S2126 - Sponsor Memo

 
BILL NUMBER: S2126

SPONSOR: KRUEGER
 
TITLE OF BILL:

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

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1: Names the bill.

Section 3a: Amends the Retirement and Social Security Law to prohibit
the State Comptroller from investing monies of the Common Retirement
Fund (Fund)in the Carbon Underground 200, an aggregated list of the top
100 coal and top 100 oil/gas (fossil fuel) publicly traded companies, as
defined by carbon content in the companies' proven reserves. Divestment
from coal companies must be completed within one year. Divestment from
all other fossil fuel companies must be completed five years from the
effective date of this subdivision.

Section 3b: Permits the Comptroller to cease divestment or to 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.

Section 3c: 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 catastro-
phe. Therefore, the State of New York has a responsibility to take steps
to avert this disastrous result. Divesting the Fund from all investments
in fossil fuels, as mandated by this legislation, is one important step
among many that are necessary to move our changing climate away from the
precipice of a global disaster. Divestment will send a powerful message
to fossil fuel companies and remove their social license to operate
without regard for human health and safety.

The consensus of the international scientific community is that climate
change will lead to rising sea levels, increasingly intense storm events
and severe droughts. It threatens our global water and food supplies and
causes severe loss of critical biodiversity.  Climate change threatens
lives, livelihoods and the integrity of our society. Among the risks New
York faces are:

*Rising temperatures
*Increased precipitation
*Increase in droughts and heat waves
*Increased intensity of hurricanes
*Rising sea levels

All of these increased risks contribute to the following:

*Harm to human health and safety

*Increasing healthcare costs

*Increasing costs borne by municipalities and local governments

*Higher insurance costs

*Loss of property value

*Contamination of water and soil

*Deforestation

*Loss of wetlands

*Species extinction

*Losses to agriculture, fisheries, and tourism

*Destruction of homes and displacement of families and communities

*Loss of business, income and overall societal economic stability

The 2009 Copenhagen Accord was heralded as the first time explicit emis-
sions pledges were made by all major economies, including China and
other major developing countries. The resulting agreement recognized
that an increase in global average temperature of more than 2 degrees
Celsius (2~C), a policy target informed by science, would lead to an
unsafe risk of irreversible climate change. The accord called for a
review of the emissions pledges by 2015 to consider strengthening the
long-term goals.

The Paris climate conference of December 2015 was the next pivotal
global conference to address climate change mitigation. During the gath-
ering, 195 countries adopted the first ever universal, legally binding
global climate deal. The agreement set out a global action plan to put
the world on track to avoid dangerous climate change by limiting global
warming to well below the original target of 2~C; to strive for 1.5~C
above pre-industrial levels instead.

In April of 2016, the United Nation's Intergovernmental Panel on Climate
Change (IPCC), the UN's body for assessing the science related to
climate change, was asked to create a special report comparing the
differences in the impacts on the earth of global warming between 1.5~C
and 2~C temperature targets. The IPCC released the 'Special Report on
Global Warming of 1.5~C' in October of 2018. In it, more than 6000
scientific references, by 91 authors from 40 countries were cited. The
overarching conclusion of the IPCC report is that impacts on ocean
temperatures, weather patterns, biodiversity and ecosystems, over
372,000 miles of global coastlines, crop yields, Artic sea ice, ecosys-
tem functions and services to humans, and the risk of global extinctions
are substantially lower if the global warming threshold is reduced from
2~C to 1.5~C above pre-industrial levels. Stated in another way, the
severity of a variety of climate change impacts could be avoided by
limiting global warming to 1.5~C compared to 2~C.
The current administration has pulled out of the Paris Agreement as of
June 1, 2017. As a response, several governors formed the U.S.  Climate
Alliance to continue to advance the Paris Agreement at the state level.
In order to reach warming that is no greater than 1.5~C, more aggressive
measures must be taken to limit the amount of carbon dioxide emissions
released by the burning of fossil fuels. At least 80% of all proven coal
reserves, half of proven gas reserves and one third of proven oil
reserves must stay in the ground. This would allow us to limit the
concentration of CO2 in the atmosphere from the initial target of 450
parts per million (ppm) to a much more responsible level of 350 ppm.
Rapid emissions reduction is required.  As the third largest economy in
the U.S., New York has a responsibility to contribute to climate change
mitigation and must act on it now.

A growing global movement to accelerate the discontinuation of usage of
all fossil fuels has focused on financial divestment. Divestment goals
that are aggressive will assist in accomplishing the required CO2
reduction to ensure that warming is targeted to 1.5~C. New York's Fund,
with an audited value of $207.4 billion in assets as of March 31, 2018,
invests at least $5.12 billion in public pension money in companies that
mine, drill and produce fossil fuels. The Fund is one of the largest and
most visible institutional investors in the world. By divesting from
fossil fuels, the Fund will send a message that it is unacceptable for
any institution to profit from activities that threaten the future of
our society. Divestment from these companies by the Fund will begin the
process of delegitimizing a business model that, while potentially prof-
itable 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.

The Office of the State Comptroller (OSC) has made a significant effort
to use stockholder engagement to influence the actions of climate-damag-
ing fossil fuel companies. However, these companies have largely ignored
appeals from OSC and other institutional investors about the detrimental
impact of fossil fuels, have consistently played down the threat posed
by climate change, and have 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. Their business plan is at odds
with scientific reality, which makes stockholder engagement a futile
endeavor and demonstrates 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. The
governor of the Bank of England, Mark Carney, stated that a vast majori-
ty of fossil fuel reserves are unburnable if global temperature rises
are to be limited to below 2¤C. He highly recommends that financial
firms transition to a low carbon economy now instead of being forced
into making rapid adjustments which could trigger steep losses later.
The President of the World Bank Jim Yong Kim stated that governments and
businesses should consider withdrawing funding from oil, gas and coal
companies. Climate change threatens all development gains made over the
last two decades. Former Treasury Secretary Henry Paulson has expressed
a concern that the global community has seen and felt the costs of

underestimating the financial bubble and that the world should not
underestimate and ignore the climate bubble.

In recent years, fossil fuel companies have seen their market valuations
threatened by the success of renewable energy, electric vehicles, wind,
storage and other clean energy sector stocks. Fossil fuel-free invest-
ment vehicles have significantly outperformed fossil fuel investment
vehicles over the last decade. An October 2018 Corporate Knights analy-
sis concluded that the Fund's weighted average yields, stock holdings
and valuations would be $22.2 billion greater if it had divested from
fossil fuels in 2008. This would have left each of the Fund's 1,122,636
members $19,820 richer at the conclusion of the analysis period.

Although there have been brief periods of volatility when clean energy
sector stocks have underperformed fossil fuel stocks, oil price spikes
of as much as 40 percent over the last year and a half have caused
demand to shift to renewable energy sources. Clean energy sector stocks
almost doubled in comparison to stocks in the fossil fuel sector.
Increased fossil fuel prices will continue to pave the way for increased
demand for clean energy products and services. In turn, this will fuel
the new energy economy and ultimately drive market valuations higher.

Whereas high fossil fuel prices drive the clean energy transition, hurt-
ing the long-term prospects of fossil fuel producers, low prices also
damage those companies' bottom lines. Although lower prices increase
demand for fossil fuels, they make profitability much more difficult to
achieve in the increasingly unconventional extraction methods required
to recover existing reserves, such as tar sands and deep-sea drilling.
This effect was seen in the write-off by several large oil companies of
their investments in Canadian tar sands in 2017, as well as the lack of
interest in pursuing drilling off the coast of Alaska.

Long-term trends toward a low-carbon economy do not suggest a repeat of
any sustained fossil fuel boom similar to previous periods. Given the
growing understanding of the reality of climate change and the increas-
ing likelihood of national and international action to reduce fossil
fuel use, companies whose value is based on unburnable carbon reserves,
also known as "stranded assets," risk rapid devaluation. As climate
policy and technology adjusts, and consumer trends grow that focus more
on renewable energy sources, fossil fuel companies risk mounting debt,
lack of access to capital for upgrades, expansions, new projects such as
pipelines, and diminishing revenue streams.

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 Fund 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 environ-
mental necessity, and it is therefore specially mandated to occur within
one year. The Fund has already lost over $260 million through coal
investments since 2010 at a time of generally strong market growth, and
those investments are not likely to recover. Coal is one of the dirti-
est, most carbon intensive sources of energy, emitting more carbon diox-
ide 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 1.5~C
threshold.

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
1,000 institutions, including local governments, faith based organiza-
tions, philanthropic foundations and pension funds totaling almost $8
trillion. The selloff of coal, oil and gas is predominantly being led by
insurance companies. They are implementing coal exclusion policies, or
have ceased to underwrite coal projects altogether. In 2018, Ireland
became the world's first nation to divest its $10.4 billion sovereign
wealth fund from fossil fuels.  Shell now cites divestment as a major
material risk to its current business model, which could lead to project
delays or cancellations and could affect its ability to access capital.

The list of institutions involved in the divestment movement includes,
but is not limited to, the following: Teachers Retirement System of the
City of New York, New York City Employees Retirement System, California
Public Employees' Retirement System (CalPERS), California State Teach-
er's Retirement System; Pratt Institute, Union Theological Seminary of
New York City, The New School, and Stanford and Syracuse Universities;
the cities of Seattle, San Francisco, Portland, Minneapolis, and Ithaca;
the World Council of Churches, and the United Methodist Church USA;
Guardian Media Group, the Rockefeller Brothers and Family Funds, The
Blumenthal Foundation, and the sovereign wealth fund of Norway.

Divestment is financially prudent, morally imperative, responsible poli-
cymaking. The time for action is now.

 
PRIOR LEGISLATIVE HISTORY:

2017-18 S4596A/A 3712-A died in committee
2015-2016: S.5873/A.8011-A died in committee

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

Undetermined

 
EFFECTIVE DATE:
Immediately.

S2126 - Bill Text download pdf


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

                                  2126

                       2019-2020 Regular Sessions

                            I N  S E N A T E

                            January 22, 2019
                               ___________

Introduced by Sens. KRUEGER, ADDABBO, BAILEY, BRESLIN, BROOKS, CARLUCCI,
  COMRIE,  HOYLMAN, MONTGOMERY, PARKER, RIVERA, SANDERS, SERRANO, STAVI-
  SKY -- read twice and ordered printed, and when printed to be  commit-
  ted to the Committee on Civil Service and Pensions

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:

  Section  1.  This  act  shall be known and may be cited as the "fossil
fuel divestment act".
  § 2. Section 423 of the retirement and social security law, as amended
by chapter 770 of the laws of 1970, is amended to read as follows:
  § 423. Investments.   [a.] 1.  On  and  after  April  first,  nineteen
hundred  sixty-seven,  the comptroller shall invest the available monies
of the common retirement fund in any investments and securities  author-
ized  by  law for each retirement system and shall hold such investments
in his name as trustee of such fund, notwithstanding any other provision
of this chapter. Participating interests in such  investments  shall  be
credited  to each retirement system in the manner and at the time speci-
fied in [paragraph] SUBDIVISION two of section four  hundred  twenty-two
of this article.
  [b.]  2.  (A)  To assist in the management of the monies of the common
retirement fund, the comptroller shall appoint  an  investment  advisory
committee  consisting of not less than seven members who shall serve for
his term of office. A vacancy occurring from any cause other than  expi-
ration  of  term shall be filled by the comptroller for the remainder of
the term. Each member of the committee shall be experienced in the field
of investments and shall have served, or shall be serving, as  a  senior
officer  or  member of the board of an insurance company, banking corpo-
ration or other financial or investment organization  authorized  to  do
business  in the state of New York. The committee shall advise the comp-

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

                                                           LBD05278-01-9

S. 2126                             2

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

S. 2126                             3

  (C)  WITHIN  SIXTY DAYS OF THE EFFECTIVE DATE OF THIS SUBDIVISION, THE
COMPTROLLER SHALL FACILITATE THE IDENTIFICATION OF FOSSIL FUEL COMPANIES
FROM WHICH THE COMMON RETIREMENT FUND IS REQUIRED TO DIVEST UNDER  PARA-
GRAPH  (A)  OF  THIS  SUBDIVISION, AND FILE A COPY OF THIS LIST WITH THE
ATTORNEY  GENERAL,  THE  SENATE  STANDING COMMITTEE ON CIVIL SERVICE AND
PENSIONS, AND THE ASSEMBLY STANDING COMMITTEE ON GOVERNMENTAL EMPLOYEES.
ANNUALLY THEREAFTER, THE PUBLIC FUND SHALL FILE A REPORT WITH THE ATTOR-
NEY  GENERAL,  THE  SENATE  STANDING  COMMITTEE  ON  CIVIL  SERVICE  AND
PENSIONS,  AND THE ASSEMBLY STANDING COMMITTEE ON GOVERNMENTAL EMPLOYEES
THAT INCLUDES: (I) ALL INVESTMENTS SOLD, REDEEMED, DIVESTED OR WITHDRAWN
IN COMPLIANCE WITH PARAGRAPH (A)  OF  THIS  SUBDIVISION;  AND  (II)  ALL
PROHIBITED INVESTMENTS FROM WHICH THE COMMON RETIREMENT FUND HAS NOT YET
DIVESTED UNDER PARAGRAPH (A) OF THIS SUBDIVISION.
  § 3. This act shall take effect immediately.

Co-Sponsors

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S2126A (ACTIVE) - Details

See Assembly Version of this Bill:: A1536
Current Committee:: Senate Civil Service And Pensions
Law Section:: Retirement and Social Security Law
Laws Affected:: Add §423-d, R & SS L
Versions Introduced in Other Legislative Sessions:: 2015-2016: S5873, A8011
2017-2018: S4596, A3712

S2126A (ACTIVE) - Summary

Limits investments of public pension funds in fossil fuel companies.

S2126A (ACTIVE) - Sponsor Memo

 
BILL NUMBER: S2126A

SPONSOR: KRUEGER
 
TITLE OF BILL:

An act to amend the retirement and social security law, in relation to
limitations on investments of public pension funds; and providing for
the repeal of such provisions upon expiration thereof

 
SUMMARY OF SPECIFIC PROVISIONS:

Section 1: Names the  bill.

Section 2: Legislative findings.

Section 3: Amends the retirement and social security law by adding a new
section 423-d as follows:

1. Definitions. Defines key terms including "coal producer," "oil and
gas producer," "direct investment," and "indirect investment."

2. Fossil Fuel Producer Exclusion List. Requires the State Comptroller,

within six months, to create a list of all coal producers and oil and
gas producers in which the Common Retirement Fund has direct invest-
ments. The list will be updated biennially. The Comptroller will notify
any company included on the list.

3. Removal From Exclusion List. At any time following publication of the
exclusion list, a company may request removal by the Comptroller on the
basis of clear and convincing evidence that they are not a coal, oil, or
gas producer, or that they will not meet the definition of coal, oil, or
gas producer by January 1, 2030.

4. Determination of Prudence. Within six months of the publication of
the exclusion, the Comptroller must issue a Determination of Prudence as
to whether divestment from any or all companies on the exclusion list
complies with his or her fiduciary obligations and the prudent investor
rule. If the Comptroller determines it would be imprudent to divest from
any company, that company will be removed from the exclusion list. Any
removed companies will be returned to the exclusion list in five years,
subject to a new determination of prudence at that time.

5. Divestment. Beginning one year after the effective date, subject to
an affirmative determination of prudence, and in accordance with sound
investment criteria and consistent with his or her fiduciary obli-
gations, the Comptroller shall divest the Common Retirement Fund from
direct investments in any company on the exclusion list, and cease new
direct investments in any company that meets the definition of a coal,
oil, or gas producer. Divestment from oil and gas producers shall take
place within five years of the effective date, while divestment from
coal producers shall take place within two years of the effective date.

6. Limitations on Indirect Investment. Beginning one year after the
effective date, subject to an affirmative determination of prudence, and
in accordance with sound investment criteria and consistent with his or
her fiduciary obligations, the Comptroller shall ensure that the Common
Retirement Fund does not invest in any indirect investment vehicle
unless he or she is satisfied that it is unlikely to have more than 2%
of its assets invested in coal, oil, or gas producers.
7. Reporting. The Comptroller shall issue a biennial report on all
actions taken to comply with this section.

Section 4: Effective Date. This act shall take effect immediately, and
sunset on January 1, 2050.

 
JUSTIFICATION:

Climate change is a real and serious threat to the health, welfare, and
prosperity of all New Yorkers, now and in the future. Maintaining the
status quo of fossil fuel energy production will lead to catastrophic
results. The United Nations Intergovernmental Panel on Climate Change
has determined that in order to keep the increase in global average
temperature below 1.5 degrees Celsius, global greenhouse gas emissions
must decline by 45% by 2030, and reach net zero by 2050. As such, New
York State has codified into law a goal of reaching a 40% economy-wide
greenhouse gas emissions reduction relative to 1990 levels by 2030, and
net zero emissions by 2050.

This bill will require the State Comptroller, after due consideration of
his or her fiduciary responsibility and the prudent investor standard,
to divest the state Common Retirement Fund (the Fund) from major coal,
oil, and gas producers. This will protect the fund, as well as its
members and retirees, from the growing risk of rapid devaluation these
companies present, while also sending a powerful message that it is no
longer acceptable to invest in a business model that is driving the
climate crisis.

The threat of climate change and the transformation of the global energy
system that will be necessary to mitigate it will have a serious nega-
tive impact on investors whose assets are not aligned with a 1.5 degree
trajectory. Experts estimate that demand for fossil fuels is likely to
peak within the next decade. In spite of this, the majority of fossil
fuel producers are not adjusting their business models to take into
account the changing energy market, investing billions of dollars in
exploring and extracting new reserves, creating stranded asset risk and
the potential for rapid, unexpected, and significant loss of value.

Continued investment in fossil fuel producers poses unacceptable risk to
the long-term sustainability of the Fund. Attempting to beat the market
by holding these investments until the last possible moment is a high-
risk strategy that could result in the loss of investment principal. In
the words of the Decarbonization Advisory Panel for the New York State
Common Retirement Fund, "being too early in the avoidance of the risk of
permanent loss is much less of a danger than being too late."

The Legislature is bound by a fiduciary responsibility over the pension
fund. This responsibility includes a duty to future as well as current
beneficiaries. It is therefore incumbent upon the Legislature as fiduci-
ary to concern itself with how the Fund rebalances its investments to
meet its financial performance targets, favoring the long-term sustaina-
bility of the fund over seeking short-term gains. Fossil fuel producers
are currently under-performing compared to the broader market. However,
even if they were to produce acceptable returns in the near term, they
present undue long-term risk that compels trustee action on behalf of
future beneficiaries.


Duties to future beneficiaries may also reasonably include consideration
of their human interests, quality of life, and public safety and securi-
ty, and therefore may mandate that trustees try to accelerate the shift
away from fossil fuels to help mitigate the future adverse effects of
climate change. Given the systemic threat of climate change to the econ-
omy as a whole, and therefore to the value of the Fund's entire portfo-
lio, consideration of the climate impact of certain investments is
entirely appropriate. According to the US Department of Labor's inter-
pretive bulletin 2015-1, environmental issues "may have a direct
relationship to the economic value of the plan's investment. In these
instances, such issues are not merely collateral considerations or tie-
breakers, but rather are proper components of the fiduciary's primary
analysis of the economic merits of competing investment choices."

The Fund is one of the largest and most visible institutional investors
in the world. By divesting from fossil fuels, the Fund will send a
message that it is unacceptable for any institution to attempt to profit
from activities that threaten the future of our society.  Divestment
from these companies by the Fund will begin the process of delegitimiz-
ing a business model that is socially and morally, and increasingly
financially, bankrupt. As a state, New York cannot fully commit to the
steps necessary to prevent climate change while maintaining a financial
interest in companies whose profits depend almost exclusively on the
continuation of practices that cause climate change.

The Fund has set a precedent by choosing to divest from certain indus-
tries in the past due to the moral implications of their business
models, including private prisons, firearms manufacturers, and companies
doing business with Sudan. Over 1,100 institutional investors represent-
ing more than $11 trillion in holdings have chosen to fully or partially
divest from fossil fuel producers, including the Teachers Retirement
System of the City of New York, the New York City Employees Retirement
System, and the sovereign wealth funds of Norway and Ireland. This bill
adopts the prevailing approaches of these similarly situated fiduciaries
with regard to fossil fuel divestment, and therefore complies with the
prudent investor standard defined in state law.

The Legislature is within its constitutional authority to instruct the
Comptroller to divest from fossil fuel producers along the lines
outlined in this bill. The Court of Appeals ruled in Scaglione v Levitt
that the Comptroller's freedom to invest is "limited by the continuing
power of the Legislature to expand or restrict the classes and kinds of
investments in which he may place the funds in his care," provided that
his or her discretion is not impaired. The Comptroller's discretion is
maintained in this bill through the mechanism of the Determination of
Prudence. The Court of Appeals further ruled in McDermott v. Regan and
Guzdek v. McCall that a proposed change to the management of the Retire-
ment System would compel "close examination" if, in addition to inter-
fering with the Comptroller's discretion, it destabilized the system or
created an inappropriate level of risk in the management of the Fund.
This bill, if enacted, would not meet any of these thresholds.

Given the severely adverse impact that climate change will have on the
lives of all New Yorkers and all people on the planet, the State has a
responsibility to take all available steps to avert and mitigate it.
Attempting to profit from investments in companies whose business
models, public relations campaigns, and lobbying efforts not only fail
to comply with New York's statutory climate goals, but put the stability
of our society and the safety of our citizens at risk, is neither moral-
ly acceptable nor in compliance with the Legislature's fiduciary respon-
sibility to current and future pension beneficiaries.

Divestment is financially prudent, morally imperative, responsible poli-
cymaking. The time for action is now.

 
PRIOR LEGISLATIVE HISTORY:

2017-18 54596A/A 3712-A died in committee

2015-2016: S.5873/A.8011-A died in committee

 
FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS:

Undetermined

 
EFFECTIVE DATE:
Immediately.

S2126A (ACTIVE) - Bill Text download pdf


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

                                 2126--A

                       2019-2020 Regular Sessions

                            I N  S E N A T E

                            January 22, 2019
                               ___________

Introduced  by  Sens. KRUEGER, ADDABBO, BAILEY, BIAGGI, BRESLIN, BROOKS,
  CARLUCCI, COMRIE, GIANARIS,  HARCKHAM,  HOYLMAN,  JACKSON,  LIU,  MAY,
  METZGER,  MONTGOMERY,  MYRIE, PARKER, PERSAUD, RAMOS, RIVERA, SALAZAR,
  SANDERS, SEPULVEDA, SERRANO, SKOUFIS, STAVISKY, THOMAS --  read  twice
  and ordered printed, and when printed to be committed to the Committee
  on  Civil  Service and Pensions -- 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; and providing for
  the repeal of such provisions upon expiration thereof

  THE PEOPLE OF THE STATE OF NEW YORK, REPRESENTED IN SENATE AND  ASSEM-
BLY, DO ENACT AS FOLLOWS:

  Section  1.  This  act  shall be known and may be cited as the "fossil
fuel divestment act".
  § 2. Legislative findings. 1. a. Climate change is a real and  serious
threat  to  the  health, welfare, and prosperity of all New Yorkers, now
and in the future. Maintaining the status  quo  of  fossil  fuel  energy
production will lead to catastrophic results.
  b.  The  United  Nations Intergovernmental Panel on Climate Change has
determined that in order to keep the increase in global average  temper-
ature  below  1.5  degrees Celsius, global greenhouse gas emissions must
decline by 45% by 2030, and reach net zero by 2050.
  c. As such, New York State has codified into law a goal of reaching  a
40%  economy-wide  greenhouse  gas  emissions reduction relative to 1990
levels by 2030, and net zero emissions by 2050.
  d. The threat of climate change and the transformation of  the  global
energy  system that will be necessary to mitigate it will have a serious
negative impact on investors whose assets are not  aligned  with  a  1.5
degree trajectory.
  2. a. Continued investment in fossil fuel producers poses unacceptable
risk to the long-term sustainability of the Common Retirement Fund.

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

                                                           LBD05278-04-9

S. 2126--A                          2

  b.  Experts  estimate  that  demand for fossil fuels is likely to peak
within the next decade.  In spite of this, the majority of  fossil  fuel
producers  are  not adjusting their business models to take into account
the changing energy market, investing billions of dollars  in  exploring
and extracting new reserves, creating stranded asset risk and the poten-
tial for rapid, unexpected, and significant loss of value.
  c.  Attempting  to  beat the market by holding these investments until
the last possible moment is a high-risk strategy that  could  result  in
the  loss  of  investment principal. In the words of the Decarbonization
Advisory Panel for the New York State Common Retirement Fund, "being too
early in the avoidance of the risk of permanent loss is much less  of  a
danger than being too late."
  3.  a. The Legislature is bound by a fiduciary responsibility over the
pension fund.
  b. This responsibility includes a duty to future as  well  as  current
beneficiaries. It is therefore incumbent upon the Legislature as fiduci-
ary  to  concern  itself with how the Fund rebalances its investments to
meet its financial performance targets, favoring the long-term sustaina-
bility of the Fund over seeking short-term gains. Fossil fuel  producers
are  currently  underperforming compared to the broader market. However,
even if they were to produce acceptable returns in the near  term,  they
present  undue  long-term  risk that compels trustee action on behalf of
future beneficiaries.
  c. Duties to future beneficiaries may reasonably include consideration
of their human interests, quality of life, and public safety and securi-
ty, and therefore may mandate that trustees try to accelerate the  shift
away  from  fossil  fuels to help mitigate the future adverse effects of
climate change.
  d. Given the systemic threat of climate change to  the  economy  as  a
whole,  and  therefore  to  the  value  of  the Fund's entire portfolio,
consideration of the climate impact of certain investments  is  entirely
appropriate.  According  to  the  US  Department of Labor's interpretive
bulletin 2015-1, environmental issues "may have a direct relationship to
the economic value of the plan's investment. In  these  instances,  such
issues  are  not  merely  collateral considerations or tie-breakers, but
rather are proper components of the fiduciary's primary analysis of  the
economic merits of competing investment choices."
  e.  The  Common  Retirement  Fund  has  set a precedent by choosing to
divest from certain industries in the past due to the moral implications
of their business models, including private prisons,  firearms  manufac-
turers,  and  companies  doing  business with Sudan, all while complying
with the Comptroller's fiduciary obligations.
  f. Over 1,100 institutional investors representing more than $11 tril-
lion in holdings have chosen to pursue full or partial  divestment  from
fossil  fuel  producers, including the Teachers Retirement System of the
City of New York, the New York City  Employees  Retirement  System,  the
endowment  and pension funds of the University of California system, and
the sovereign wealth funds of Norway and Ireland. This bill  adopts  the
prevailing  approaches  of  these  similarly  situated  fiduciaries with
regard to fossil  fuel  divestment,  and  therefore  complies  with  the
prudent  investor  standard  defined  by  section 11-2.3 of the estates,
powers and trusts law.
  4. a. The  Legislature  is  within  its  constitutional  authority  to
instruct  the Comptroller to divest from fossil fuel producers along the
lines outlined in this bill.

S. 2126--A                          3

  b. The Court of Appeals ruled in SCAGLIONE V. LEVITT  that  the  Comp-
troller's  freedom  to invest is "limited by the continuing power of the
Legislature to expand or restrict the classes and kinds  of  investments
in  which  he may place the funds in his care," provided that his or her
discretion  is  not impaired. The Comptroller's discretion is maintained
in this bill through the mechanism of the Determination of Prudence.
  c. The Court of Appeals further ruled in MCDERMOTT V. REGAN and GUZDEK
V. MCCALL that a proposed change to the  management  of  the  Retirement
System  would  be  deemed "radical" and would compel "close examination"
if, in addition to interfering with  the  Comptroller's  discretion,  it
destabilized the system or created an inappropriate level of risk in the
management  of  the  Fund. The Legislature finds that there is extensive
evidence that this bill, if enacted, would not meet any of these thresh-
olds.
  d. Existing state law, in effect for decades, provides an example of a
limitation on the Comptroller's freedom to invest, placing  requirements
on  the  Comptroller  to  consider  certain social and political factors
before investing in companies doing business in Northern Ireland.
  5. a. Given the severely adverse impact that climate change will  have
on  the lives of all New Yorkers and all people on the planet, the State
has a responsibility to take all available steps to avert  and  mitigate
it.
  b.  Attempting  to profit from investments in companies whose business
models, public relations campaigns, and lobbying efforts not  only  fail
to comply with New York's statutory climate goals, but put the stability
of our society and the safety of our citizens at risk, is neither moral-
ly acceptable nor in compliance with the Legislature's fiduciary respon-
sibility to current and future pension beneficiaries.
  § 3. The retirement and social security law is amended by adding a new
section 423-d to read as follows:
  §  423-D.  FOSSIL  FUEL  DIVESTMENT.  1.  DEFINITIONS. AS USED IN THIS
SECTION:
  A. "COAL PRODUCER" MEANS ANY CORPORATION OR COMPANY, OR ANY SUBSIDIARY
OR PARENT OF ANY CORPORATION OR COMPANY, THAT DERIVES  AT  LEAST  TWENTY
PERCENT  OF ANNUAL REVENUE FROM THERMAL COAL PRODUCTION, OR ACCOUNTS FOR
MORE THAN ONE PERCENT OF GLOBAL PRODUCTION OF  THERMAL  COAL,  OR  WHOSE
REPORTED  COAL  RESERVES  CONTAIN  MORE  THAN  0.3 GIGATONS OF POTENTIAL
CARBON DIOXIDE EMISSIONS;
  B. "DIRECT INVESTMENT" MEANS OWNERSHIP OF AN INDIVIDUAL STOCK, SECURI-
TY, EQUITY, ASSET, OR OTHER OBLIGATION OF A CORPORATION OR COMPANY;
  C. "EXCLUSION LIST" MEANS THE LIST CREATED PURSUANT TO PARAGRAPH A  OF
SUBDIVISION TWO OF THIS SECTION;
  D. "INDIRECT INVESTMENT" MEANS A HOLDING IN AN INVESTMENT VEHICLE THAT
DIRECTLY  OR  INDIRECTLY  OWNS  AN  INDIVIDUAL  STOCK, SECURITY, EQUITY,
ASSET, OR OTHER OBLIGATION OF A CORPORATION OR COMPANY;
  E. "OIL AND GAS PRODUCER" MEANS ANY CORPORATION  OR  COMPANY,  OR  ANY
SUBSIDIARY  OR  PARENT  OF  ANY  CORPORATION OR COMPANY, THAT DERIVES AT
LEAST TWENTY PERCENT OF ANNUAL REVENUE FROM OIL OR  GAS  PRODUCTION,  OR
ACCOUNTS  FOR  MORE THAN ONE PERCENT OF GLOBAL OIL OR GAS PRODUCTION, OR
WHOSE REPORTED COMBINED OIL AND GAS RESERVES CONTAIN MORE THAN 0.1 GIGA-
TONS OF POTENTIAL CARBON DIOXIDE EMISSIONS;
  F. "OIL OR GAS PRODUCTION" MEANS  EXPLORATION,  EXTRACTION,  DRILLING,
PRODUCTION,  REFINING, PROCESSING, OR DISTRIBUTION ACTIVITIES RELATED TO
OIL OR GAS; AND
  G. "THERMAL COAL PRODUCTION" MEANS MINING, TRANSPORT,  PROCESSING,  OR
EXPLORATION ACTIVITIES RELATED TO THERMAL COAL.

S. 2126--A                          4

  2.  FOSSIL  FUEL  PRODUCER EXCLUSION LIST. A. WITHIN SIX MONTHS OF THE
EFFECTIVE DATE OF THIS SECTION, THE COMPTROLLER SHALL CREATE  AN  EXCLU-
SION  LIST  OF  ALL  COAL  PRODUCERS  AND OIL AND GAS PRODUCERS IN WHOSE
STOCKS, SECURITIES, EQUITIES, ASSETS, OR OTHER  OBLIGATIONS  THE  COMMON
RETIREMENT FUND HAS ANY MONEYS OR ASSETS DIRECTLY INVESTED.
  B.  UPON  COMPLETION  OF THE EXCLUSION LIST, IT SHALL BE MADE PUBLICLY
AVAILABLE, AND A COPY SHALL BE SENT TO THE TEMPORARY  PRESIDENT  OF  THE
SENATE AND THE SPEAKER OF THE ASSEMBLY.
  C.  THE  COMPTROLLER  SHALL  SUBMIT NOTIFICATION TO ANY CORPORATION OR
COMPANY THAT HAS BEEN INCLUDED IN THE EXCLUSION LIST INFORMING  THEM  OF
THEIR  INCLUSION,  AS WELL AS THE REQUIREMENTS OF SUBDIVISIONS THREE AND
FIVE OF THIS SECTION.
  D. AT THE COMPTROLLER'S DISCRETION, BUT NO LATER THAN TWO YEARS  AFTER
THE  COMPLETION OF THE EXCLUSION LIST, AND NO LESS FREQUENTLY THAN BIEN-
NIALLY THEREAFTER, THE COMPTROLLER SHALL UPDATE THE  EXCLUSION  LIST  TO
REMOVE  ANY  CORPORATION OR COMPANY THAT IS NO LONGER A COAL PRODUCER OR
AN OIL AND GAS PRODUCER, AND ADD ANY CORPORATION OR COMPANY NECESSARY TO
COMPLY WITH PARAGRAPH A OF THIS SUBDIVISION, WITH THE EXCEPTION OF  SUCH
COMPANIES  REMOVED  FROM  THE  EXCLUSION LIST PURSUANT TO PARAGRAPH B OF
SUBDIVISION FOUR OF THIS SECTION.
  3. REMOVAL FROM THE EXCLUSION LIST.  A.  AT  ANY  TIME  FOLLOWING  THE
PUBLICATION  OF  THE EXCLUSION LIST, ANY CORPORATION OR COMPANY INCLUDED
IN THE LIST MAY SUBMIT TO THE COMPTROLLER A REQUEST FOR REMOVAL  ON  THE
BASIS  OF  CLEAR  AND  CONVINCING EVIDENCE THAT THEY ARE NOT CURRENTLY A
COAL PRODUCER OR AN OIL AND GAS PRODUCER AS DEFINED IN  SUBDIVISION  ONE
OF  THIS  SECTION  OR  THAT  THEY WILL NO LONGER MEET SUCH DEFINITION BY
JANUARY FIRST, TWO THOUSAND THIRTY.
  B. UPON SATISFACTION  THAT  A  CORPORATION  OR  COMPANY  HAS  MET  THE
REQUIREMENTS  OF  PARAGRAPH A OF THIS SUBDIVISION, THE COMPTROLLER SHALL
REMOVE THAT CORPORATION OR COMPANY FROM THE EXCLUSION LIST, AND  PROVIDE
A WRITTEN EXPLANATION FOR SUCH REMOVAL TO THE TEMPORARY PRESIDENT OF THE
SENATE AND THE SPEAKER OF THE ASSEMBLY.
  4. DETERMINATION OF PRUDENCE. A. WITHIN SIX MONTHS FROM THE COMPLETION
OF  THE EXCLUSION LIST THE COMPTROLLER SHALL ISSUE A DETERMINATION AS TO
WHETHER DIVESTMENT FROM ANY OR ALL  CORPORATIONS  OR  COMPANIES  ON  THE
EXCLUSION  LIST,  IN  WHOLE  OR IN PART, PURSUANT TO SUBDIVISION FIVE OF
THIS SECTION COMPLIES WITH HIS OR  HER  FIDUCIARY  OBLIGATIONS  AND  THE
PRUDENT  INVESTOR  RULE  AS  DEFINED  BY  SECTION 11-2.3 OF THE ESTATES,
POWERS AND TRUSTS LAW. THE COMPTROLLER  SHALL  MAKE  SUCH  DETERMINATION
PUBLICLY  AVAILABLE  AND A COPY SHALL BE SENT TO THE TEMPORARY PRESIDENT
OF THE SENATE AND THE SPEAKER OF THE ASSEMBLY.
  B. IF THE COMPTROLLER DETERMINES THAT DIVESTMENT FROM ANY  CORPORATION
OR COMPANY ON THE EXCLUSION LIST DOES NOT COMPLY WITH HIS OR HER FIDUCI-
ARY  OBLIGATIONS  AND  THE  PRUDENT  INVESTOR RULE AS DEFINED BY SECTION
11-2.3 OF THE ESTATES, POWERS AND TRUSTS LAW, THAT CORPORATION OR COMPA-
NY SHALL BE REMOVED FROM THE EXCLUSION LIST.
  C. AT ANY TIME, SUBJECT TO THE COMPTROLLER'S DISCRETION, BUT NO  LATER
THAN  FIVE YEARS AND SIX MONTHS FROM THE EFFECTIVE DATE OF THIS SECTION,
AND EVERY FIVE YEARS THEREAFTER, ANY CORPORATIONS OR  COMPANIES  REMOVED
FROM  THE  EXCLUSION  LIST  PURSUANT  TO PARAGRAPH B OF THIS SUBDIVISION
SHALL BE RETURNED TO THE EXCLUSION LIST, SUBJECT TO A NEW  DETERMINATION
OF PRUDENCE ISSUED AT THAT TIME PURSUANT TO PARAGRAPH A OF THIS SUBDIVI-
SION.
  5. DIVESTMENT. A. COMMENCING ONE YEAR AFTER THE EFFECTIVE DATE OF THIS
SECTION, SUBJECT TO AN AFFIRMATIVE DETERMINATION OF PRUDENCE PURSUANT TO
SUBDIVISION  FOUR  OF THIS SECTION, AND IN ACCORDANCE WITH SOUND INVEST-

S. 2126--A                          5

MENT CRITERIA AND CONSISTENT WITH HIS OR HER FIDUCIARY OBLIGATIONS,  THE
COMPTROLLER  SHALL: (I) DIVEST THE COMMON RETIREMENT FUND OF ANY STOCKS,
SECURITIES, EQUITIES, ASSETS, OR OTHER OBLIGATIONS  OF  CORPORATIONS  OR
COMPANIES  ON  THE  EXCLUSION  LIST IN WHICH ANY MONEYS OR ASSETS OF THE
COMMON RETIREMENT FUND ARE DIRECTLY INVESTED; AND (II) CEASE NEW  DIRECT
INVESTMENTS OF ANY MONEYS OR ASSETS OF THE COMMON RETIREMENT FUND IN ANY
STOCKS,  SECURITIES,  OR OTHER OBLIGATIONS OF ANY CORPORATION OR COMPANY
THAT IS A COAL PRODUCER OR OIL AND GAS PRODUCER.
  B. DIVESTMENT FROM OIL AND GAS PRODUCERS PURSUANT TO THIS  SUBDIVISION
SHALL  BE  COMPLETED NO LATER THAN FIVE YEARS FROM THE EFFECTIVE DATE OF
THIS SECTION. DIVESTMENT FROM OIL AND  GAS  PRODUCERS  RETURNED  TO  THE
EXCLUSION  LIST  PURSUANT  TO  PARAGRAPH  C  OF SUBDIVISION FOUR OF THIS
SECTION SHALL BE COMPLETED NO LATER THAN FIVE YEARS  FROM  THE  DATE  OF
RETURN TO THE EXCLUSION LIST.
  C.  DIVESTMENT  FROM COAL PRODUCERS PURSUANT TO THIS SUBDIVISION SHALL
BE COMPLETED NO LATER THAN TWO YEARS FROM THE  EFFECTIVE  DATE  OF  THIS
SECTION.   DIVESTMENT FROM COAL PRODUCERS RETURNED TO THE EXCLUSION LIST
PURSUANT TO PARAGRAPH C OF SUBDIVISION FOUR OF  THIS  SECTION  SHALL  BE
COMPLETED  NO LATER THAN TWO YEARS FROM THE DATE OF RETURN TO THE EXCLU-
SION LIST.
  6. LIMITATIONS ON INDIRECT INVESTMENT. COMMENCING ONE YEAR  AFTER  THE
EFFECTIVE  DATE  OF  THIS SECTION, AND NO LATER THAN FIVE YEARS FROM THE
EFFECTIVE DATE OF THIS SECTION, SUBJECT TO AN AFFIRMATIVE  DETERMINATION
OF PRUDENCE PURSUANT TO SUBDIVISION FOUR OF THIS SECTION, AND IN ACCORD-
ANCE WITH SOUND INVESTMENT CRITERIA AND CONSISTENT WITH HIS OR HER FIDU-
CIARY  OBLIGATIONS,  THE  COMPTROLLER  SHALL  ENDEAVOR TO ENSURE THAT NO
MONEYS OR ASSETS OF THE COMMON RETIREMENT FUND ARE INVESTED IN AN  INDI-
RECT  INVESTMENT  VEHICLE  UNLESS  HE  OR SHE IS SATISFIED ON REASONABLE
GROUNDS THAT SUCH INDIRECT INVESTMENT VEHICLE IS  UNLIKELY  TO  HAVE  IN
EXCESS  OF  TWO  PERCENT  OF  ITS ASSETS, AVERAGED ANNUALLY, DIRECTLY OR
INDIRECTLY INVESTED IN COAL PRODUCERS AND OIL AND GAS PRODUCERS.
  7. REPORTING. COMMENCING TWO YEARS AFTER THE EFFECTIVE  DATE  OF  THIS
SECTION  AND ANNUALLY THEREAFTER THE COMPTROLLER SHALL ISSUE A REPORT TO
THE TEMPORARY PRESIDENT OF THE SENATE AND THE SPEAKER OF  THE  ASSEMBLY,
AND  SHALL  MAKE  SUCH  REPORT PUBLICLY AVAILABLE, OUTLINING ALL ACTIONS
TAKEN TO COMPLY WITH THIS SECTION.
  § 4. This act shall take effect immediately and shall  expire  and  be
deemed repealed January 1, 2050.

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