New York State’s comptroller, Thomas DiNapoli, announced on Wednesday that the state would begin divesting its $226 billion employee pension fund from gas and oil companies if they can’t come up with a legitimate business plan within four years that is aligned with the goals of the Paris climate accord. Those investments have historically added up to roughly $12 billion.
The entire portfolio will be decarbonized over the next two decades. “Achieving net-zero carbon emissions by 2040 will put the fund in a strong position for the future mapped out in the Paris Agreement,” he said in a statement.
It’s a huge win, obviously, for the activists who have fought for eight years to get Albany to divest from fossil fuel companies and for the global divestment campaign. Endowments and portfolios worth more than than $14 trillion have joined the fight. This new move is the largest by a pension fund in the United States, edging the New York City pension funds under Comptroller Scott Stringer, who announced in 2018 that the fund would seek to divest $5 billion in fossil fuel investments from its nearly $200 billion pension fund over five years.
But it also represents something else: capitulations that taken together suggest that the once-dominant fossil fuel industry has reached a low in financial and political power.
The first capitulation, by investors, is to the understanding that most of Big Oil simply won’t be a serious partner for change. Mr. DiNapoli had long been an advocate of engagement with the fossil fuel companies, arguing that if big shareholders expressed their concerns, those companies would change course. This, of course, should be how the world works: He was correctly warning the companies that their strategy endangered not only the planet but also their businesses, and they should have listened.
But time and again, they let him down. In December of 2017, for instance, after prodding from Mr. DiNapoli, Exxon Mobil agreed to “analyze how worldwide efforts to adopt the Paris Agreement goals for reducing global warming might impact its business,” he said in a statement at the time. That could have been a turning point. But two months later Exxon published the absurd results of that analysis: The Paris Agreement would have no effect on its business, and it could pump all its reserves of oil and gas. (As it happens, leaked documents have since made it clear that Exxon was planning to significantly increase its emissions by ramping up production.)
Divestment remains a “last resort,” Mr. DiNapoli said in his statement. But he made clear that it was “an investment tool we can apply to companies that consistently put our investment’s long-term value at risk.”
The oil industry has long wanted to cast itself as a responsible partner for progress on climate change, as opposed to “unrealistic” divestment activists. The Independent Petroleum Association of America even set up an anti-divestment website to pressure decision makers like Mr. DiNapoli not to pull the money they oversee out of fossil fuel companies.
Mr. DiNapoli deserves credit for standing up to the industry’s still-considerable power, even if it comes late in the game. And he is now positioned to join Mr. Stringer as one of the strongest voices for climate action in the financial sector. He can speak with the unquestioned credibility of someone who tried to work collaboratively.
It’s an argument that other investors are ready to hear, not just because of the climate threat, but also because the fossil fuel industry has been the worst-performing sector of the American economy for many years now.
Its problems are twofold: It faces a sprawling resistance movement, rooted in the undeniable fact that its products are wrecking the planet’s climate system. And in wind and sun, it faces formidable technological competitors who can provide the same service, just cleaner and cheaper.
These realities will destroy the coal, gas and oil barons; the only question is, how fast. Big Oil’s strategy at this point is delay, but that course gets harder and harder, especially as the Trump administration exits and with it the shield of protection the industry has enjoyed.
There are signs that this second capitulation — the surrender of the oil companies to the reality of their situation — has begun.
One of the so-called supermajors, BP PLC, announced this summer that it would cut its oil and gas production by 40 percent over the decade and significantly increase its investments in renewable energy. Divestment campaigners can be excused for casting a jaundiced eye on the news — BP announced in 2000 that it was going “Beyond Petroleum,” a crusade it soon abandoned. But this time at least they have the rhetoric right:
“This coming decade,” the company’s C.E.O. said in a statement, “is critical for the world in the fight against climate change, and to drive the necessary change in global energy systems will require action from everyone.”
Even Exxon has been humbled to the point where a kind of silent capitulation seems to be starting. As recently as 2013 it was the biggest company on the planet; by this autumn it wasn’t even the biggest energy company, having been briefly surpassed in market capitalization by NextEra Energy, a Florida-based renewables provider.
Last week Exxon made clear its new status, disclosing it would slash its exploration and capital expenditure budget from a planned $30 billion to $35 billion next year to barely half that and write off up to $20 billion in natural gas assets that it now acknowledges it will never pump.
This fall from grace for oil and gas companies can’t come fast enough — it recalls the collapsing fortunes of the coal industry over the past decade, a slide that Mr. DiNapoli helped to exacerbate by divesting the New York State pension fund from coal this past summer.
Not only does the decline of Big Oil mean less carbon in the long run; it also means less political influence in the short run and hence less power to slow down the steps necessary for a transition to carbon-free energy. Big Oil’s influence on the Republican Party remains large, but President-elect Joe Biden doesn’t face the same hulking beast his predecessors have had to work around. If Mr. DiNapoli can stand up to these forces, it augurs well for what the new administration may accomplish.
Last month set the global mark for the hottest November ever recorded, and it seems increasingly certain that despite a growing La Niña cooling in the Pacific, 2020 will tie or break the record for the hottest year.
The planet is heating rapidly, but — as the news from Albany makes clear — so is the movement to do something about it.
Bill McKibben, a founder of the climate advocacy group 350.org, teaches environmental studies at Middlebury College and is the author of “Falter: Has the Human Game Begun to Play Itself Out?”
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