Living in the COVID World ... and Beyond #63: Pension and Retirement Funds
I have been part of a Connecticut Climate Finance Group that has been meeting for several months on a variety of climate finance issues including legislation in the Connecticut legislature, protesting and advocating for changes in the policies of Connecticut-based insurance companies away from fossil fuel companies, and developing positions regarding the state’s pension and retirement funds.
This week, we met with Connecticut’s State Treasurer and 3 of his top deputies. The State Treasurer manages $60 billion on behalf of the state’s pensioners and retirees.
We came to the meeting with four requests:
1. Move state investments away from climate-change-causing fossil fuels. In 2025, we ask you to start this process by committing to making no new investments in stocks, bonds or private equity investments in companies or funds that invest in fossil fuel producers or pipeline companies.
2. Invest more in renewable energy to enable the state of CT to benefit financially from the massive trend toward decarbonization. In 2025, we ask you to commit to $569 million investment (1% of the 2024 total assets of $56.9 billion) in companies and funds focused on climate solutions and to increase that commitment by 1% of total assets annually by 2030.
3. Vote as a shareholder for company disclosures of Scope 1, 2 and 3 greenhouse gas emissions and to support policies that mitigate systemic climate risk.
4. Co-file key resolutions that mitigate climate risk, and pre-declare AGM season votes to build support amongst peers.
Six of the attendees were asked to provide our perspective as to why it was important for the State Treasurer to act on our requests. These six speakers were a teenager, a religious leader, an environmental justice advocate, a Connecticut State retiree, an elder who is a local leader of Third Act, and me. I was asked to speak to the financial risk of climate change.
The meeting went well. The State Treasurer and his office are already taking some constructive steps. Our intent was to both support him in his actions and to push him to do more.
Below are the remarks that I made in the meeting with Connecticut State Treasurer Erick Russell:
“Hi, my name is Mike Markovits. I co-lead a climate team at Temple Sinai in Stamford. And I’m a retired executive from GE and IBM.
Ashen, Terri, and Ivelisse have presented compelling moral, climate, and justice- based reasons for shifting the state’s investments.
I’m going to add what some might describe as a cruder rationale. Let’s improve the state’s returns on its investments and provide long-term sustainable returns for current and future pensioners and retirees. It is consistent with the state’s fiduciary responsibility to seek the highest possible returns while managing risk.
Fossil fuel stocks reported a 5.7% return in 2024, barely 1/5 of the S&P 500’s performance.
The fossil fuel sector has underperformed the S&P 500 in 7 of the last 10 years and were the poorest performing sector in 5 of those years.
Investment in fossil fuel business has been described as asymmetric in the sense that the foreseeable rewards are not likely to be equal to the foreseeable risks. This means there Is limited potential upside and significant potential downside to investing in the fossil fuel sector. In the long term, it is highly likely that risks associated with a decarbonizing world will result in a sharp decline in the value of fossil fuel companies.
Thinking even more broadly, we know that the climate crisis is already exploding insurance costs and making entire regions uninsurable. The systemic risk created by climate change threatens the foundation of the financial sector and other sectors as well.
It is vital for the country and the world that we transition our economy away from fossil fuels. It is the state’s fiduciary responsibility to manage climate risk. Connecticut can help the environment and make more money … and this is in the best interests of our state’s pensioners and retirees.”
In Blog #33, I wrote about a presentation that I did at my Temple’s Mitzvah Day on “Moving Our Money.” As much as it is beneficial for each of us to divest from any support for fossil fuel companies – the companies themselves and their funders, it is even more important for big institutional investors to move their money away from fossil fuels and into renewables.
In the United States alone, as of 2022, there was 35 trillion dollars in pension funds. These funds are managed by the local and state governments, employers, and unions on our behalf as current and/or future pensioners/retirees. If we can help to move these pensions funds from investing in fossil fuels and their funders (banks and insurance companies, for example), it would make a big difference.
How is your pension fund invested? Who manages your pension fund? Let’s investigate and make our voices heard. I hope you can take steps to support the kinds of efforts that we are making in Connecticut wherever you live.