New York City wants to shut the door on investor-owned fossil fuel funds within five years and is seeking damages from BP plc, Chevron Corp., ConocoPhillips, ExxonMobil Corp. and Royal Dutch Shell plc to protect the city from what it claims are the effects of climate change.
In a first-in-the-nation step, Mayor Bill de Blasio, Comptroller Scott M. Stringer and other trustees of the city’s $189 billion pension funds on Wednesday launched a sweeping plan to drop fossil fuel investments from the city’s five pension plans.
The funds hold an estimated $5 billion in securities from more than 190 fossil fuel-related companies. A joint resolution was to be submitted by the mayor and comptroller for pension fund trustees to begin working to drop fossil fuel ownership “in a responsible way” consistent with fiduciary obligations.
"New York City is standing up for future generations by becoming the first major U.S. city to divest our pension funds from fossil fuels,” said de Blasio. “At the same time, we’re bringing the fight against climate change straight to the fossil fuel companies that knew about its effects and intentionally misled the public to protect their profits.
“As climate change continues to worsen, it’s up to the fossil fuel companies whose greed put us in this position to shoulder the cost of making New York safer and more resilient.”
Stringer said the announcement “sends a message to the world that a brighter economy rests on being green. It’s complex, it will take time, and there are going to be many steps. But we’re breaking new ground, and we are committed to forging a path forward while remaining laser-focused on our role as fiduciaries to the systems and beneficiaries we serve.”
In its lawsuit against the five investor-owned oil and gas operators as “measured by their contributions to global warming, New York City wants to put the onus on Big Oil” to make the region more resilient to climate change impacts.
‘Resiliency Measures’ Underway
Damages are being sought from BP, Chevron, ConocoPhillips, ExxonMobil and Shell “for the billions of dollars the city will spend to protect New Yorkers from the effects of climate change. This includes damages to pay for harm that we’ve already seen and damages that are necessary to address harm we expect to happen over the course of this century.”
The lawsuit would seek to recover the funds needed to build “climate change resiliency measures” to protect property and residents “from the ongoing and increasingly severe impacts of climate change,” including physical infrastructure, like coastal protections, upgraded water and sewer infrastructure, and heat mitigation. It also would seek to pay for public health campaigns, as for example, to “help protect residents from the effects of extreme heat.”
To prepare for future events and for recovery from “past harm,” New York City already has begun a $20 billion-plus resiliency infrastructure program to protect against rising seas, storms and hotter temperatures.
“Recently uncovered documents make it clear that the fossil fuel industry was well aware of the effects that burning fossil fuels would have on the planet’s atmosphere and the expected impacts of climate change as far back as at least the 1980s,” city leaders said.
“Nonetheless, they deliberately engaged in a campaign of deception and denial about global warming and its impacts, even while profiting from the sale of fossil fuels and protecting their own assets from the effects of rising seas and a changing climate. More than half of the greenhouse gas pollution from the fossil fuel industry has occurred since 1988, according to a recent analysis. Sea levels have risen about one foot since 1900 with much of that rise due to climate change, the most powerful storms are becoming more frequent, and flooding is becoming more frequent and intense.”
Advise And Divest
New York City’s “toughest challenge” may be climate change in the coming decades.
As a first step in its divestment plan, the trustees for each of New York city’s funds have been instructed by the Office of the City Comptroller’s Bureau of Asset Management (BAM) to commission an analysis of the proposed divestment and then advise on the anticipated impact on the risk and return characteristics of the portfolio.
The trustees also are to seek a legal opinion as to whether carrying out the divestment would be consistent with fiduciary duties to beneficiaries.
“Assuming a positive legal opinion, the trustees would then instruct BAM to carry out the divestment with specified steps and timelines. In the case of this divestment, transactions would likely be carried out in stages in order to reduce transaction and implementation costs.”
Reaction from conservation groups appeared to be overwhelmingly positive.
“This is what climate leadership looks like," said Sierra Club executive director Michael Brune. “To confront the climate crisis, we must hold corporate polluters accountable in the streets, in the boardrooms and in the courts. In the absence of leadership from the White House, it’s encouraging to see city and state leaders...stepping up and taking meaningful action to defund the fossil fuel industry and fight climate change.”
Christiana Figueres, former head of the United Nations Framework Convention on Climate Change and architect of the Paris climate agreement, said the announcement “is another reminder of New York City’s long-standing position at the cutting edge of culture, as a beacon for entrepreneurs and innovators focused on building a better future. The exponential transition toward a fossil-fuel-free economy is unstoppable and local governments have a critical role to play.
“There is no time to lose. It’s therefore extremely encouraging to see New York City step up today to safeguard their city and exercise their role as investors to protect their beneficiaries from climate risk.”
New York City may be the largest city but it is far from the first to announce divestments from fossil fuels. In 2014, Rockefeller Brothers Fund, started by one of the first families of Big Oil, Standard Oil, said it would drop fossil fuel investments because of climate change.
Many investment firms also are withdrawing support for oil and gas projects, including European banking giant BNP Paribas, which last fall said its global financing policy is to no longer include doing business with companies whose principal activity is the “exploration, production, distribution, marketing or trading of oil and gas from shale and/or oil from tar sands.”
ExxonMobil Spars With California
Meanwhile, ExxonMobil claimed this week in Texas state court that some government officials in California want to demonize the supermajor to pursue their climate change agendas.
ExxonMobil asked the Tarrant County District Court in Fort Worth to allow it to depose several California officials and others. The California counties of Marin, Santa Cruz and San Mateo, along with the cities of San Francisco, Oakland, Santa Cruz and Imperial Beach, last year filed a lawsuit concerning the impacts of climate change against dozens of energy operators, including ExxonMobil.
“It is reasonable to infer that the municipalities brought these lawsuits not because of a bona fide belief in any tortious conduct by the defendants or actual damage to their jurisdictions, but instead to coerce ExxonMobil and others operating in the Texas energy sector to adopt policies aligned with those favored by local politicians in California,” ExxonMobil’s brief stated.
The legal team noted that some of the municipalities had offered conflicting information in their lawsuits against the operators regarding climate change policies. For example, Marin County claimed that there was a 99% risk it would experience a major flood before 2050, but it has not disclosed that information in municipal bond offerings.
Sixteen individuals also may possess evidence of a civil conspiracy, according to ExxonMobil. A “playbook” by one of the individuals is said to underlie a lawsuit initially brought in 2015 that is led by the attorneys general (AG) of New York and Massachusetts. The wide ranging case is investigating whether ExxonMobil misled investors about the impact of its operations on climate change.
“A collection of special interests and opportunistic politicians are abusing law enforcement authority and legal process to impose their viewpoint on climate change,” ExxonMobil’s lawsuit said. “This conspiracy emerged out of frustration in New York, Massachusetts and California with voters in other parts of the country and with the federal government for failing to adopt their preferred policies on climate change.
“But rather than focusing their efforts in the marketplace of ideas and adopting a strategy of persuasion, the members of this conspiracy chose to advance their political objectives by imposing unlawful burdens on perceived political opponents.”