Few funds ready to follow Stanford's lead on fossil fuel stocks

Fri May 9, 2014 4:49pm EDT

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(Reuters) - Few if any of the big U.S. pension or college endowment funds appear ready to follow in Stanford University's footsteps and pull their money out of shares of coal miners or other fossil fuel producers.

Officials from the pension systems for California's public employees and schoolteachers and New York public employees, the three largest U.S. retirement funds, told Reuters they prefer to work with their portfolio companies to improve their behavior rather than divest them.

Matthew Sweeney, a spokesperson for the New York State Comptroller's office, which oversees the state's $161 billion pension fund, said the state had "not divested from any fossil fuel companies. We do have an extensive history of engaging portfolio energy companies on climate change, emissions, safety and other issues to change and improve their business practices."

Officials at the $283.5 billion California Public Employees' Retirement System, or Calpers, and the $183 billion California State Teachers' Retirement System, or Calstrs, said their funds have a similar approach.

The three systems own roughly $140 million of the top coal company stocks among them, including CONSOL Energy, Peabody Energy, Arch Coal, Alpha Natural Resources and Cloud Peak Energy. New York's position is the biggest of the three at $61 million, according to Reuters data.

BIG MONEY COLLEGE FUNDS

Advocates for divestiture of fossil-fuel-sector shares in university endowment funds so far have made most of their headway with small funds associated with fewer than a dozen liberal arts colleges. Apart from Stanford, which earlier this week announced it would drop coal company holdings from its $18.7 billion endowment fund, the cause has little traction among the top endowments.

Harvard, which has the largest endowment at $32 billion, has rejected calls from students and faculty to divest fossil fuel stocks. Instead it adopted last month a set of environmental and social investing principles backed by the United Nations that encourage signatories to urge companies to make more disclosures on areas like carbon emissions. A spokesman for Harvard declined to comment and referred to the university's past statements.

Dan Apfel, head of the activist group Responsible Endowments Coalition, said he hoped Stanford's decision had made it easier for other funds to switch to fossil-free investments.

"Stanford is a huge victory for the campaign," Apfel said. "This will put pressure on all the other top-tier universities that had said no to divestment or are deciding what to do."

Billionaire environmental activist Tom Steyer, a Stanford graduate and contributor to its endowment, last year sent letters to Brown University and Middlebury College urging them to divest their endowments of some fossil fuel stocks. Both schools rejected the calls to divest. Spokespeople at Brown and Middlebury declined to comment following the Stanford announcement.

Some midsize endowments, however, are considering change.

At American University, an internal committee's report found that a fossil-fuel-free portfolio might offer competitive returns for its $535 million endowment, according to documents viewed by Reuters. The report will be reviewed by trustees later this month.

But Camille Lepre, assistant vice president for communications, said it would be premature to characterize any expectations for specific action by the school's Board of Trustees.

Thomas Meyer, a student member of the campus campaign group Fossil Free AU, said he hoped "the move by Stanford will show the trustees that this is the right move."

LEGISLATIVE INTEREST

Other states are encouraging their state pension funds to reassess fossil fuel investments.

In Massachusetts, 43 legislators have backed a bill that would require the state's pension funds to sell or withdraw $1.4 billion in fossil fuel investments within five years. Currently, fossil fuels constitute upwards of 2.8 percent of the fund's $54 billion value, according to legislative supporters of the bill, which is currently under committee review.

Earlier this month in Maine, a hotbed for the fossil fuel divestment movement, the legislature overrode a governor's veto and created a task force to develop an environmental, social and governance policy for the Maine Public Employees Retirement System, the state's roughly $12 billion pension fund.

Meanwhile, this week the New York State Common Retirement Fund was called out by a former state finance executive, who advocated selling the 2.5 million shares of coal stocks the fund owns.

"The current position of the U.S. coal industry, and increasingly that of the world coal industry, is weak, and the worst is yet to come," said Tom Sanzillo, a former New York deputy comptroller and finance director at the Institute of Energy Economics and Financial Analysis.

Over the last three years coal stocks in New York state's pension fund declined by $108 million, the institute said.

(Editing by Dan Burns and Douglas Royalty)

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