PITTSBURGH (AP) — Some of the largest pension funds in the U.S.
and the world are worried that major fossil fuel companies may not be
as profitable in the future because of efforts to limit climate change,
and they want details on how the firms will manage a long-term shift
to cleaner energy sources.
In a statement released Thursday, leaders of 70 funds said they're asking
45 of the world's top oil, gas, coal and electric power companies to
do detailed assessments of how efforts to control climate change could
impact their businesses.
"Institutional investors must think over the long term, which means
that we must take environmental risks into consideration when we make
investments," New York State Comptroller Thomas DiNapoli told The
Associated Press in a statement. The state's Common Retirement Fund manages
almost $161 billion of investments.
Fossil fuels currently provide about 80 percent of all the energy used
in the world. The pension funds say that because it takes decades to
recoup the huge investments required for fossil fuel exploration, there's
a significant chance that future regulations will limit production or
impose expensive pollution-control requirements that would reduce the
Others signers of the letter include the comptrollers or treasurers
of California, New York City, Maryland, Oregon, Vermont and Connecticut,
as well as The Church of England Pensions Board, the Scottish Widows
Investment Partnership, the investment firm Rockefeller & Co. and
dozens of other funds that control a total of about $3 trillion. Only
a fraction of that is with fossil fuel companies, however.
The funds sent letters to the fossil fuel companies last month, asking
for studies to be finished by spring.
The American Petroleum Institute, which represents the industry, was
examining the statement and did not immediately comment. Shell Oil Co.
declined to comment.
"The underlying question here is the billions of dollars that are
being invested" in exploration for fossil fuels every year, and
whether that's a prudent investment, said Jack Ehnes, the head of the
California's State Teachers' Retirement System, which has about $5.4
billion invested in major fossil fuel companies.
Ehnes made clear that his fund is not seeking to punish the fossil fuel
companies but rather work with them to study the issue and identify long-term
options that will be good for shareholders, the environment and the firms.
While the pension funds are concerned about climate change, their strategy
is more moderate than a student-led movement that is asking schools around
the country to divest from fossil fuels.
"The scientific trajectory that we're on is clearly in conflict" with
the business strategy of the companies, Ehnes added, referring to the
overwhelming consensus among top scientists from around the world that
global warming is a man-made threat, that pollution from fossil fuels
is the biggest problem and that many of the already-discovered fossil
fuel reserves will need to stay in the ground to avoid extreme climate
The effort is being coordinated by Boston-based Ceres, a coalition of
investors and companies that advocate for sustainable business practices,
and the Carbon Tracker initiative, an effort to get companies to better
explain to investors the value of their fossil fuel reserves.
Carin Dehne-Kiley, the director of Corporate Ratings for Standard & Poor's
in New York, said the issue of how climate change may impact companies
is "definitely something that we think about over the long term."
But she added that it's going to be hard for the companies to estimate
and quantify long-term risks, since the timing and intensity of regulations
could vary so much in the future, as could the pace of climate change.
Nevertheless, the financial clout of the pension funds "definitely" makes
it more likely that major fossil fuel companies will listen to the concerns,
"We've been pleasantly surprised by the seriousness" of some
companies who are "not just blowing us off," said Andrew Logan,
a Ceres spokesman, who said 30 companies have sent preliminary responses.
Ceres estimates that $674 billion was invested in developing fossil
fuel resources around the world in 2012, compared with $281 billion for