New Report: MD State Pension Fund Sacrifices Millions of Dollars in Investment Returns Funding Fossil Fuel Companies That Cause Climate Change
Maryland has sacrificed millions of dollars in potential returns by investing in fossil fuel companies responsible for the climate crisis, according to a recent report analyzing the Maryland State Retirement and Pension System (SRPS). SRPS has sacrificed returns of more than 15 percentage points since 2010 in the public equity portion of the fund by buying and holding dirty energy stocks.
The report – published by researchers at FFI Solutions – examines Maryland’s holdings in the Carbon Underground 200 (CU200). The CU200 identifies the top 100 holders of coal reserves and the top 100 holders of publicly traded oil and gas reserves worldwide, ranked by the potential carbon emissions content of their reported reserves. Despite Maryland’s vulnerability to climate change, the report shows that as of September 2021, SRPS held stakes in 162 of these CU200 companies. Of these fossil fuel investments, the two largest holdings in the portfolio by weight — that is, the percentage that these companies hold in the portfolio — were Exxon Mobil and Chevron. Although Maryland outlawed “fracking” in 2017, the SRPS had stakes in companies that engage in fracking in neighboring states. Additionally, the report shows that as of September 2021, the SRPS portfolio held well over half a billion dollars ($623,093,558) in securities of CU200 companies.
Since 2010, the FFI report shows that by removing 200 fossil fuel companies, the public equity portfolio would have outperformed the unedited portfolio by 15.19 percentage points over the backtest period. In fact, the portfolio’s holdings have increased by 128.58% since 2010. Without the CU200 holdings, the portfolio would have increased by 143.77%. In other words, for every $1,000 invested by the public equity portfolio in 2010, returns would be $150 higher today if the portfolio had been divested from CU200 companies. During this period, the FFI report also shows that the SRPS would not have been exposed to a higher risk of sudden increases or decreases in returns due to the divestment of fossil fuel holdings.
“This report is a double whammy of bad news,” said Mike Tidwell, executive director of the Chesapeake Climate Action Network and CCAN Action Fund. “By investing in dirty coal and the tar sands, the Maryland State Pension Fund is reducing the retirement funds of our teachers and firefighters AND contributing to global warming. It’s time for the state legislature to demand the divestment from fossil fuels to protect our climate and our pensioners.
“Maryland lags behind other state pensions as it continues to hold dirty, unprofitable investments in coal, oil and gas,” said Jeff Weisner, chairman of the 350 Montgomery County Board of Directors (350 MoCo). “Our state pension needs to put its money where our values are and get out of fossil fuels.”
“Thousands of Maryland educators, myself included, are counting on the retirement system to be strong for decades to come. It is clear now that divestment from fossil fuels is the best path forward for the SRPS to protect the system from below-average financial returns,” said Chris Wilhelm, ESL teacher at Northwood High School in SilverSpring, MD. Most public school teachers in Maryland participate in the SRPS.
The report is divided into three sections: an instant report showing the SRPS fossil fuel holdings, a diagnostic report which looks at the holdings in more detail, and a backtest report showing the estimated performance of the portfolio with and without the fossil fuel holdings at the time. over time. .
FFI Solutions’ report was commissioned by CCAN Action Fund and 350 MoCo. FFI Solutions is a research and analytics-driven advisory firm that empowers investors and asset managers to transition to more sustainable investments. For more information on the report’s methodology, you can contact Michael Palmieri at [email protected]