E&E Legal Letters Issue XIV: State, City Investment Officers the Next Stop for ‘Climate Change’ Industry & “Divestment through value destruction” Campaign

by Chris Horner, Senior Legal Fellow

In February 2014, acting on tips received, E&E Legal requested records regarding “climate risk disclosure” from the New York Office of Attorney General (OAG) under that state’s Freedom of Information Law (FOIL). This “CRD” movement is part of a campaign to, in effect, coerce ‘confessions’ out of energy-related interests that catastrophic man-made global warming is a real problem, of which they constitute a significant part, that their reserves are worth little to nothing and their public filings and other statements constitute misdeeds and even fraud.

This new, legally dubious but politically explosive theory is that the companies have been deceiving the public about the dangers that carbon emissions pose to the climate. The ensuing document productions revealed the scheme to be a parallel one to the AGs’ “climate-RICO” scheming that E&E Legal has exposed, and continues to pursue, with some timely requests to several states in Spring of last year.

The two campaigns even share multiple early participants from the green-group, investment and law enforcement crowds, including NY OAG, Rockefeller interests, and certain Wall Street activists.=

Within two months of E&E sending in its “disclosure” FOIL, the Natural Resources Defense Council (NRDC) loudly announced it was partnering with one of the world’s most powerful money-management firms, BlackRock, on an index fund for individuals and organizations looking to divest from companies targeted by anti-greenhouse gas campaigns. On March 13, BlackRock announced it was escalating its “climate risk” campaign as a priority initiative.

NRDC put nearly $70 million in the fund controlled by BlackRock, a $5-plus trillion firm that has emerged as an active participant with government at all levels – even referred to as a shadow government, amassing wealth in large part through government contracts.

Records obtained by E&E Legal show that NRDC approached public officials managing pension funds on behalf of the BlackRock fund, seeking these fiduciary officers direct funds under their trust into this project of green activists, wealthy donors and Wall Street financiers to profit off of environmental policy that they advocate with very close friends in government

In progressive circles, the NRDC-BlackRock partnership has been lauded as a pioneering move offering an important tool for climate-conscious investors, including foundations, universities and publicly run pension funds.

Arguably, this reflects just another tight-knit network of progressive philanthropists and environmental activists, coordinating with sympathetic government bureaucrats, in their chosen field of manufacturing ‘grassroots’ movements to promote policies that benefitting their own bottom lines.

This network uses a variety of campaign-style tactics seeking to hobble targeted corporations either directly or by impeding their access to capital markets: ad campaigns, lawsuits, shareholder resolutions, calls for government regulations, and even placing activists in responsible “ESG” positions in financial institutions while moving out the insufficiently enthusiastic.

In many instances, wealthy individuals or organizations, attempting to conceal their role in driving these campaigns, rely heavily on nonprofit advocacy groups and others in their network of allies to attack the record of targeted companies, all under the cover of public interest advocacy.

Now, records obtained already by E&E Legal show an effort by NRDC to used their relationships among staff at the New York State Comptroller’s office to lobby the Comptroller, Thomas DiNapoli about divesting and reinvesting into BlackRock’s fossil free index – a request that was met with some internal ridicule despite the ham-fisted advocacy on its behalf by one former Sierra Club activist now on the inside.

The Comptroller’s office granted the meeting, to the chagrin of Comptroller lawyers who warned that once the activists “start pitching a particular fund or manager or try to bring us to a specific investment opportunity to create some sort of critical mass, we could have an issue under our placement agent policy, not in the sense of a payment to the NRDC (which seems unlikely) but potentially the ‘other benefit’ they seek for their policy agenda… particular companies cannot be the subject of a ‘pitch’ by advocates or other not for profits.”

The Office began backing away, after these warnings suggesting that NRDC, in doing the bidding of its business partner, may have crossed the line from environmental activism to financial opportunism, particularly in light of the fact that both NRDC and BlackRock have been active in the attacks on the fossil fuel industry.

Other records show Comptroller staff expressing concerns about, and detailing, the questionable assumptions and approach of fossil fuel divestment legislation proposed by State Senator Liz Krueger and Assemblyman Peter Ortiz. Interestingly, one of the bill’s co-sponsors chose to contact executive branch staff on the matter “off-line”, using his AOL account though obviously aware of his position, and FOIL.

E&E Legal also uncovered an SICS Google Group — Shareholder Initiative on Climate and Sustainability is a working group of Ceres’ Investor Network on Climate Risk. Participants include New York State and City Comptroller Offices officials, reps from various state treasurer offices (e.g., Vermont, Connecticut, Rhode Island, Pennsylvania), state and city employee funds, and other government officials.

These Google Group emails hint at the extent of discussions between public pension and investment officials with foundation, social justice, environmentalist and labor activists — as well as Rockefeller & Co. staff, PIMCO, and other Wall Street outfits — about how investors can prod companies to adopt “climate” policies also being promoted through the broader lobbying campaigns to mandate such actions.

One particularly striking email was sent from Mark Kresowik, director of the Sierra Club’s “Beyond Coal” campaign, in response to a thread describing their movement’s history (or “the powerful ecosystem build [sic] by [environmental, social and governance]/[Principles for Responsible Investment] public funds) “started back in 1999 by [Interfaith Center on Corporate Responsibility], [], Trillium [Asset Management, also involved in the SEC lobbying push with NY OAG and Rockefeller], Domini [Social Investments], Friends of the Earth and Christian Brothers & others” which “prompted the banks to set up the infrastructure and insights today to understand both the climate risks related to an industry in decline”.

In one story circulated among the group they boast “Environmental, social, and governance considerations now affect $8.72 trillion in professionally managed assets, which is one-fifth of the total of invested assets under professional management.” Participants include the Union of Concerned Scientists’ and CSR Strategy Group activists on their GMail, such that FOI requests seeking, e.g., UCS correspondence would not produce these.

Kresowik argues that mobilizing the financial industry is key to combatting Big Oil, just as it was in combatting the coal industry. He noted that “one of the most important steps to get here involved replacing one of the ESG staff at JPMorgan Chase, although I’m not going to go into that particular strategy in writing.”

Records received to date reveal where troves of further instructive records are kept and have been accessed by public employees subject to transparency and record keeping statutes. E&E Legal is now following up on these original findings in numerous jurisdictions’ open records laws to bring pubic further details of this collaboration, and what it suggests about how the investment officials approach their fiduciary obligations in the face of apparently irresistible ideological agendas.

E&E Legal intends to leave no stone unturned, working aggressively to reveal the unethical actions of every state official involved in the scheme. We have already submitted open records requests to numerous states and city governmental entities, from the East Coast to the West. Granted sufficient resources, we intend to carry these projects to their conclusion just as we are doing with the related “climate-RICO” effort.