A bill seeking divestment of state funds from fossil fuels was heard by the Retirement Systems Committee Feb. 9.
LB1069, introduced by Malcolm Sen. Ken Haar, would require the state investment officer to review the investment of state funds in both fossil fuels and clean energy and, to the extent that it is prudent, begin the process of divesting from fossil fuels and investing in clean energy.
The state investment officer would be required to provide a report on the status of state investment in relation to fossil fuels and clean energy to the governor and the Legislature by Dec. 15, 2016.
The bill would impact investments that derive at least 50 percent of their revenue from the extraction or combustion of fossil fuels.
Haar said the concept has precedent in Nebraska, which was the first state to require divestment from apartheid South Africa. Over 500 entities across the country have pledged divestment from fossil fuels in some form, he said, based on both moral and economic considerations.
“These campaigns are based on the concept of using capital markets to engage in social change,” Haar said. “I think this is not only the right thing to do, but I think we’ll see in the near future that it makes dollars and sense.”
James Cavanaugh, representing the Nebraska chapter of the Sierra Club, testified in support of the bill. The oil industry has proven not to be a good investment, either monetarily or morally, he said, noting the recent collapse of North Dakota’s oil-driven economic boom.
“That is not probably the best investment that you can find in today’s stock market,” he said, adding that the state instead should explore investing in clean energy. “[The bill is] just using best practices, looking to the future—the same thing that you would do with your own portfolio.”
Retired teacher Tim Fickenscher also testified in support of LB1069, saying the bill would begin a process of protecting Nebraska’s environment from the impact of climate change.
“I’m worried about students that I’ve taught and the world that they’re inheriting,” he said. “We need to accept responsibility that fossil fuels are changing our present environment.”
Michael Walden-Newman, state investment officer for the state of Nebraska, testified in opposition to the bill. The retirement plan and trust assets that are invested on behalf of the people of Nebraska must be the top priority, he said, rather than social concerns.
Removing investment options could harm the state’s returns, he said, noting that it also may be difficult for the state to divest from index funds that contain fossil fuel companies.
“The estimate is that 6 to 7 percent of the investment universe of our stock portfolio would be removed through this legislation,” Walden-Newman said.
Joe Kohout, representing the American Petroleum Institute (API), also opposed the bill.
Kohout said that an API study last year of pension funds in 17 states found that oil and gas products outperformed other investments. In addition, he said, Vermont recently chose not to divest from fossil fuels based on estimates that the state would lose between $2 million and $8.5 million in the first year of doing so.
The committee took no immediate action on the bill.