S T A T E O F N E W Y O R K
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
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.
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
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
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
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-
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
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
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-
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-
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.