Minnesota Divestment Coalition Recommendations regarding a Roadmap for Implementing Climate Risk Recommendations
The October 2022 Meketa Report laid out several recommendations regarding the implications of climate risk for investments. The State Board of Investment (SBI) is developing a road map for implementing these recommendations that will be shared before the end of the year.
Reports of unprecedented climate chaos in the world have dominated the news this summer. News from the Montana youth’s landmark climate case; New York City Comptroller Brad Lander’s outspoken and direct video statement about investments in the fossil fuel industry; and Al Gore’s eloquent address to the TED Countdown Summit in Detroit in July are examples. All of these information sources suggest that the fossil fuel industry is quickly becoming a target of accountability, and all SBI fossil fuel assets risk becoming stranded assets. The SBI board and staff must work with urgency to develop and implement the most ambitious investment guidelines that the Meketa Report calls for.
The Meketa Report recognizes that the SBI’s goal of adequate and reliable returns on investments can be met within a net zero carbon investment approach. The report recommends:
- Increased engagement with fund managers;
- Investing in climate solutions;
- Working together with other investment organisations that are addressing climate change such as the California Public Employees Retirement System (CalPERS), As You Sow, and the New York State Pension Fund; and
- Selective exclusion of companies with fossil fuel revenues from the SBI portfolio.
The Divestment Coalition supports these recommendations but they don’t go far enough. The following principles must be integrated into the roadmap:
- Divest from tar sands companies: specifically: Imperial Oil Ltd, Canadian Natural Resources, Cenovus Energy Inc, MEG Energy Corp, and Athabasca Oil Corp. The amount of greenhouse gases emitted per barrel of tar sands oil is 30% higher – throughout its life cycle – than conventional oil. That makes tar sands oil companies “the worst of the worst” among fossil fuel corporations.
- Divest from the Carbon 200
- Exclude future investments in the following:
- Companies engaged in oil exploration and drilling activities.
- Production of coal or coal-based energy.
- Companies causing severe environmental damage or unacceptable greenhouse gas damage.
- Companies engaged in deforestation such as:
- Olam International- Singapore
- Halcyon Agri Corp- Singapore
- Sime Darby Plantation- Malaysia
- Sipef- Belgium
- Scrutinise & Audit Private Equity. Before signing any contracts with private equity companies, the SBI must demand that their private market partners:
- Develop and disclose a plan with clear incremental benchmarks to shift energy portfolios to be carbon pollution free.
- Commit to no expansion of fossil fuel operations, in alignment with the IEA (International Energy Agency) Net-Zero 2050 roadmap.
- Provide a risk management strategy under a 1.5-degree scenario consistent with science-based emission targets as well as scenarios above 1.5 degrees
- Disclose all direct and indirect emissions as well as other climate impacts such as spills, accidents, and environmental fines.
- Provide transparency on political spending and how it aligns with the UN’s PRI (Principles for Responsible Investment) Investor Expectations Corporate Climate Lobbying including:
- Corporate and executive political spending – lobbying and campaign contributions.
- Political spending by portfolio companies and their executives.
- Membership in trade associations and how these trade associations’ lobbying positions align with the goals of the Paris Agreement.
Minnesota has the opportunity to be among the leaders in combating climate change while securing the financial future of pension holders and the whole state. But swift and courageous action is necessary to make this a reality.