NY Common Retirement Fund Announces New Measures to Protect State Pension Fund From Climate Risk and Invest in Climate Solutions

Link: https://www.osc.ny.gov/press/releases/2024/02/ny-common-retirement-fund-announces-new-measures-protect-state-pension-fund-climate-risk-and-invest

Excerpt:

The New York State Common Retirement Fund (Fund) will restrict its investments in eight integrated oil and gas companies, including Exxon Mobil Corp., after a review of the companies’ readiness to transition to a low-carbon economy, State Comptroller Thomas P. DiNapoli, trustee of the Fund, announced today.

The evaluation of the Fund’s integrated oil and gas holdings is part of DiNapoli’s broader review of the transition readiness of energy sector investments that face significant climate risk. With today’s announcement, the Fund will be divesting its corporate bonds and actively managed public equity holdings in eight integrated oil and gas companies that it has determined are not transition-ready. In addition to Exxon, the companies to be divested and restricted in the coming months are Guanghui Energy Company Ltd., Echo Energy PLC, IOG PLC, Oil and Natural Gas Corporation Ltd, Delek Group Ltd., Dana Gas Co and Unit Corp. The value of these holdings is approximately $26.8 million as of Dec. 31, 2023.

DiNapoli also announced the Fund has met its initial goal of committing $20 billion to the Sustainable Investments and Climate Solutions program, and has set a new goal of investing $40 billion in that program by 2035. With the program, the Fund invests in sustainable investments including clean energy generation, energy storage, resource efficiency, and green infrastructure across all asset classes. As part of the expansion of this program, DiNapoli also announced the Fund would increase its climate index investments by 50% to over $10 billion over the next two years, with the longer-term goal of doubling it by 2035.

Publication Date: 15 Feb 2024

Publication Site: Office of the Comptroller of NY State

Maine Takes on Fossil Fuel Divestment. How Will It Happen?

Link:https://www.governing.com/finance/maine-takes-on-fossil-fuel-divestment-how-will-it-happen?utm_campaign=Newsletter%20-%20GOV%20-%20Daily&utm_medium=email&_hsmi=219420154&_hsenc=p2ANqtz-__sPq7wAi53EzPYe16VS7ePNypi9aGJv7mpM9geXevYQuSJJtrQ4NzYGMvpkVK6vF2KYhovrJ2o-svNpgMLyuWsqbxbovsKME3Sm1RZLuiVq8ZdoE&utm_content=219420154&utm_source=hs_email

Excerpt:

Activists credit the support of Beck, Maine Rep. Maggie O’Neil and state Sen. Chloe Maxmin for making Maine the first state to require fossil fuel divestment by law.

Passed and signed by Maine’s governor in 2021, LD99 calls for the state’s permanent funds and its pension system, MainePERS, to divest from fossil fuel investments by 2026 and not reinvest going forward.

It prohibits both specific lists of publicly traded companies as well as any whose “core business” is in fossil fuel exploration, extraction, refining, processing or infrastructure. (A separate 2021 law also requires Maine to divest from private prisons.)

Other pension systems, including New York state’s, have made promises to divest from companies whose primary business drives planet-warming emissions, but are not required to by legislation. In 2015, California passed a law to remove public investments in thermal coal, but a move to extend that to all fossil fuel companies died in the Legislature this session.

MainePERS’ assets — about $18 billion at the end of the last fiscal year — are small in comparison to New York and California, but how they manage their legislative mandate will be closely watched as other states face calls for fossil fuel divestment and wider questions of dealing with climate risk in investing.

Leaders at the pension system stressed a key phrase in the legislation, that any MainePERS divestment decision will be made “in accordance with sound investment criteria and consistent with fiduciary obligations” — crucial to a state constitutional requirement to its pension members.

….

MainePERS Chief Investment Officer James Bennett estimates about $1.2 billion of the system’s total holdings are in fossil fuel investments, split evenly between publicly traded companies and private investments.

Liquidating private investments will be more complicated, he says. Many of the limited partnerships MainePERS is invested in include fossil fuel assets alongside other infrastructure investments and cannot be separated. They’d need to sell the whole thing, if it indeed is within the financial interest of members to do so.

Author(s): Taylor K Brown

Publication Date: 13 July 2022

Publication Site: Governing

Trends in Mandatory Spending

Link:https://crsreports.congress.gov/product/pdf/R/R44641

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In FY2023, mandatory spending accounts for an estimated 63% of total federal spending. Social Security alone accounts for about 21% of federal spending. Medicare and the federal share of Medicaid together account for another 25% of federal spending. Therefore, spending on Social Security, Medicare, and Medicaid now makes up almost half of total federal spending.

These figures do not reflect the implicit cost of tax expenditures, which are revenue losses attributable to provisions of the federal tax laws that allow a special exclusion, exemption, or deduction from gross income or provide a special credit, a preferential tax rate, or a deferral of tax liability.8 As with mandatory spending, tax policy is not controlled by annual appropriations acts, but by other types of legislation.

Author(s): Congressional Research Service

Publication Date: last updated 7 Nov 2023

Publication Site: U.S. Congress

What do rising interest rates mean for government debt?

Link: https://lizfarmer.substack.com/p/rising-interest-rates-mean-for-governments?utm_source=post-email-title&publication_id=560793&post_id=135712385&isFreemail=false

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Excerpt:

The higher the interest rates, the more costly the financing of a new project is over the long run, thus increasing pressure on the municipal budget.

The example below compares the cost of a 20-year, $10 million debt issuance at different rates. “Coupons” refer to the interest rate that bondholders get back on their investment. “PV” stands for “present value,” or the face value of the bonds when they’re issued.

Author(s): Martin Feinstein

Publication Date: 18 Aug 2023

Publication Site: Long Story Short, Liz Farmer’s Substack

D.C. to Silicon Valley: Drop Dead

Link: https://www.city-journal.org/article/d-c-to-silicon-valley-drop-dead

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For venture capitalists and startup entrepreneurs, 2023 was a year dedicated to the destructive phase of Joseph Schumpeter’s notion of creative destruction. Silicon Valley Bank collapsed in the second-largest bank failure in American history, 400,000 tech jobs were eliminated in what Wired dubbed “The Great Tech Layoffs,” and dozens of high-potential startups transformed from unicorns into “zombies.”

…..

It’s no surprise that the startup industry needed to retrench—that’s been clear to observers for some time. What is surprising, however, is the reaction of policymakers in Washington, D.C., who apparently see this moment of tech-industry weakness as an opportune time to hobble the innovation economy. Take the mess that’s become of Section 174 of the Internal Revenue Code. For decades, this section has allowed companies to expense their research and development costs for software in the current year, which means that salaries paid to software engineers are entirely deductible upfront. That’s a critical calculation for early-stage tech startups, since development costs are high and revenues are low at inception.

But as negotiators were finalizing the 2017 tax reform, they ran into a quandary: they needed to find an accounting gimmick that would add revenue to the bill so that it would be budget-neutral in the ensuing decade and pass muster with Congress’s arcane budget reconciliation process. Among other components, negotiators settled on a poison pill: five years on, starting in 2023, Section 174 accounting benefits would radically shrink, suddenly choking off the cash flow for America’s most innovative companies.

No one considered that the punishing provision would arrive just when startup innovation is shriveling in the face of higher Fed interest rates after the inflation-stoking over-exuberance of the Covid-19 economyIndustry publications and commentators have warned about the impending doom for more than a year. This week, a bipartisan group of legislators offered a path forward, coupling an antidote to the R&D poison pill with an expansion of child tax credits. But with days to go before companies must start calculating their taxes, the prospects are dim that Congress will pass the fix.

Author(s): Danny Crichton

Publication Date: 18 Jan 2024

Publication Site: City Journal

The Little Book of Data 6

Link: https://www.avivainvestors.com/en-gb/views/aiq-investment-thinking/little-book-of-data/

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The sixth edition of The Little Book of Data presents original and curated visuals, charts and graphics to offer a fresh perspective on topics shaping our world, including climate change, artificial intelligence, inflation, economics and geopolitics.

Author(s): Aviva Investors

Publication Date: October 2023

Publication Site: Aviva

Fed Rate Cut Expectations Drop on Unexpectedly Strong CPI Data

Link:https://mishtalk.com/economics/fed-rate-cut-expectations-drop-on-unexpectedly-strong-cpi-data/

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Excerpt:

  • A month ago, the market thought there was no chance the Fed would hold pat through May.
  • A week ago, the odds were 33.4 percent.
  • Yesterday, the odds were 39.3 percent.
  • Today, the market says there is a 62.1 percent chance the Fed did not cut in March or May. There is no April meeting.

Author(s): Mike Shedlock

Publication Date: 13 Feb 2024

Publication Site: Mish Talk