Fall 2022 Briefing – Welcome to Jill Schurtz, Meketa report on climate risk, Private equity climate risk, Auditor Blaha’s advocacy

The Minnesota Divestment Coalition Fall 2022 Briefing to the State Board of Investment

We extend a very warm welcome to Jill Schurtz.

The Minnesota Divestment Coalition welcomes the new Executive Director Jill Schurtz to the State Board of Investment. We look forward to working with her on implementing the recommendations of the Meketa Report as well as developing an approach to private equity investments that will not undermine Minnesota’s or our nation’s housing, health, agriculture and climate. We look forward to great progress on behalf of our pension funds today and far into Minnesota’s future.

We commend the SBI for procuring the Meketa report on climate risk.

The final Meketa report recognizes that managing a large pension fund is complex and challenging. It indicates that the impact of divesting from companies that get their revenue from fossil fuels will be modest and states that although it will be a complex process, the SBI’s goal of adequate and reliable returns on investments can be met within a net zero carbon investment approach. The report also recommends

  • Increased engagement with fund managers (adding additional staff to this effort will be essential); 
  • Investing in climate solutions;
  • Working together with other investment organizations addressing climate change such as the California Public Employees Retirement System (CalPERS), As You Sow, and the New York State Pension Fund (See articles  here and here); and
  • Selective exclusion of companies with fossil fuel revenues from the SBI portfolio.

The MN Divestment Coalition heartily endorses these recommendations in the final Meketa Report.  But while the report recommends divestment in a selective manner, we recommend a more aggressive approach. Companies whose raison d’etre is tied to extracting, processing, and transporting fossil fuels have neither the ability nor the commitment to make the required transition away from fossil fuels. Precious time and financial resources will be lost waiting for them to do so.   We urge the SBI to create a plan before the end of the year for implementing the Meketa recommendations to ensure forward momentum. 

We share with you the Private Equity Climate Risks Scorecard 2022.

The Private Equity Climate Risks Scorecard 2022, produced by the Private Equity Stakeholder Project, reveals the top eight private equity firms invested in oil and gas. The following firms, seven of which have major holdings in fossil fuel companies are analyzed:  The Carlyle Group, Warburg Pincus, KKR, Brookfield Asset Management, Ares Management, Apollo Global Management, The Blackstone Group, and TPG.  These eight firms manage over $3.6 trillion in assets which include fossil fuel assets purchased from publicly traded companies and then managed beneath the radar of public scrutiny.  Of the eight companies, the Carlyle Group is the worst performer.  It operates multiple power plants that emit millions of tons of carbon dioxide.  It has made very little progress in transitioning away from fossil fuels. The SBI is currently invested in ALL of these funds except Ares and Apollo. The SBI should cease investing in these firms until they demonstrate a commitment to a just energy transition. The report includes the following Climate Demands for Private Equity, with further details in the report.

  1. Align with science-based climate targets to limit global warming to 1.5⁰C
  2. Disclose fossil fuel exposure, emissions, and impacts
  3. Report a portfolio-wide energy transition plan
  4. Integrate climate and environmental justice
  5. Provide transparency on political spending and climate lobbying

 We Commend State Auditor Blaha for her recent advocacy of ESG investing.

Through organizing the October 6th DFL Environmental Caucus and other efforts, Auditor Blaha is helping Minnesotans understand that ESG investing is not only good for our communities but also good for the financial bottom line. The editorial she inspired in the Star Tribune lays out the threat of politically-motivated disinformation about ESG principles. That editorial was followed by a counterpoint by Minnesota legislators Lucero and Franson, which was in turn followed by another counterpoint by Don C. Leathers and three letters to the editor. Thank you, Auditor Blaha.