New York Green Deal: Strategies to Decarbonize Agency Investment Funds

This is one of a series of posts on Governor Andrew M. Cuomo’s New York State Green New Deal. As part of his 2019 Justice Agenda he included a “nation-leading clean energy and jobs agenda that will put the state on a path to carbon neutrality across all sectors of New York’s economy”.

Not surprisingly there are no details other than the announcement, no mention of potential costs, and no explanation how all this will affect any of the many impacts that he claims are caused by climate change. There is a proposal to provide the plan to make New York carbon neutral and I will blog on those plans as they become available. In the meantime this post discusses the language used to describe the mandate for New York agencies and authorities to study strategies to decarbonize their investment funds and invest in clean energy as part of the New York Green New Deal.

In the following sections I list the text from the announcement and my indented and italicized comments follow.

Direct State Agencies and Authorities to Pursue Strategies to Decarbonize their Investment Funds and Ramp Up Investment in Clean Energy

In 2018, Governor Cuomo called on the New York Common Fund, which manages over $200 billion in retirement assets for more than one million New Yorkers, to adopt a serious and responsible plan for decarbonizing its portfolio. Over the past year, the Governor has worked with the Office of the Comptroller to establish an advisory panel of experts to develop a decarbonization roadmap and guide the Common Fund toward investment opportunities that combat climate change.

I am guessing but I think that the plan to decarbonize the portfolio of the State agencies is publicly intended to publicize and signal the reality of climate change and change the economics of the fossil energy industry. It seems to me that rather than publicizing the issue for the unaware people in New York it is really intended to cater to the environmental activists who want to signal the virtue of New York State. The economics of the fossil industry will unlikely be affected: “Sin stocks”, such as tobacco shares, get a small discount because many investors will not touch them. But the main effect of this is that those who buy the stocks earn better returns. There is plenty of low-cost, environmentally insensitive capital available for energy companies that need it.”

 I am not going to bother doing a detailed comparison of the long-term financial viability of investment opportunities that combat climate change relative to the fossil assets but it seems to me that I have heard about more renewable company failures than fossil company failures. Given that renewables appear to be dependent upon subsidies suggests to me that their long term investment prospects are not that good. Investing in those stocks is yet another subsidy.

As part of the Green New Deal, Governor Cuomo is taking the next step, by directing State authorities, public benefit corporations, and the State Insurance Fund, which collectively hold approximately $40 billion in investments, to commence a process to review and evaluate the feasibility and appropriateness of divesting from fossil fuels. To scale up investment in renewable energy, green infrastructure, and climate solutions, agencies and authorities will also work to educate plan administrators and investment consultants regarding investment opportunities in the clean energy sector.

I think the most important investment strategy for the $240 billion dollars in New York funds should be economic rather than a signaling virtue. The rationale for this mandate to divest is clear: divestment is not an investment strategy, or a way of putting direct economic pressure on energy companies. It is a political statement.

Author: rogercaiazza

I am a meteorologist (BS and MS degrees), was certified as a consulting meteorologist and have worked in the air quality industry for over 40 years. I author two blogs. Environmental staff in any industry have to be pragmatic balancing risks and benefits and (https://pragmaticenvironmentalistofnewyork.blog/) reflects that outlook. The second blog addresses the New York State Reforming the Energy Vision initiative (https://reformingtheenergyvisioninconvenienttruths.wordpress.com). Any of my comments on the web or posts on my blogs are my opinion only. In no way do they reflect the position of any of my past employers or any company I was associated with.

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