New York State officials are poised to decide whether to sell off more than $1 billion in investments in major oil companies, in what could be one of the most consequential steps by a large institution to divest from fossil fuels. With an announcement expected within weeks, some climate activists are calling on the manager of the state’s largest pension fund to blacklist ExxonMobil, Chevron and other leading oil companies from its portfolio.

The move will be the most important in a multi-year review by New York State Comptroller Thomas DiNapoli, who manages the state’s Common Retirement Fund, one of the country’s largest public pension funds. In December 2020, DiNapoli said his office would launch a sector-by-sector assessment of its fossil fuel holdings and divest from those that failed to meet “minimum standards” for climate-related risks. The fund has already restricted investments in a range of coal firms and smaller, independent oil companies, while continuing to hold shares in others that met certain standards.

The process has won praise from many climate activists. Now, with a decision expected soon on the most prominent and powerful global energy firms, some of those same activists say DiNapoli needs to make a clean break with Big Oil.

“We’re getting some indications that at least some of the people in the pensions office think these fossil fuel companies are beginning to turn the corner,” said Mark Dunlea, chair of the Green Education and Legal Fund, a New York advocacy group, and an organizer with the Divest NY coalition. Exxon’s response to the comptroller’s office, which was obtained by Dunlea in a public records request and provided to Inside Climate News, pointed to the company’s efforts to reduce its own greenhouse gas emissions and to the creation of a low carbon business line that has invested in carbon capture and storage, but Dunlea said those steps are inadequate.

“The idea that over a decade into this fight we’re having an argument, in an overwhelmingly Democratic state, over whether Exxon or Shell or Chevron are doing a good job on climate is sort of baffling,” Dunlea said.

As in previous reviews of other sectors, DiNapoli’s office could choose to sell shares in some oil companies while retaining others. But a similar review conducted by a large Dutch pension fund resulted in an announcement this month that it had sold interests in all the major oil companies.

A spokesman for DiNapoli declined to comment for this article.

Some advocates for fossil fuel divestment say New York has set an example for other states. Previous state reviews of coal, oil sands and shale oil- and gas-focused companies have resulted in restrictions on investment in 55 companies. The comptroller is also conducting annual reviews of all these fossil fuel companies to determine whether they should be restricted or not, a step that puts continual pressure on the firms to take action on climate change, said Richard Brooks, climate finance director at Stand.earth, an advocacy group that has campaigned for divestment.

Now, Brooks said, “the world is very much watching what big pension funds are doing in New York.” With roughly $250 billion in assets, New York’s retirement fund is among the largest in the country.

The deliberation in New York comes as banks and institutional investors are facing a conservative backlash nationally against efforts to limit fossil fuel financing. Bank of America recently retreated from a policy to restrict lending for coal companies and oil exploration in the Arctic. New York City, which is divesting its pension funds from fossil fuels, is facing a lawsuit over that move. Last month, Exxon sued activist investors who had proposed a climate-related shareholder vote, and it has continued to pursue the case even after the activists withdrew their effort.

Dunlea said he fears DiNapoli’s office might be retreating, too, citing a delay in the review of the major oil companies, which the comptroller’s office had said would be completed last year.  

As of December 2022, New York’s retirement fund held $4.69 billion in fossil fuel stocks and bonds. As of March 2023, that included $760 million in Exxon stock, $562 million in Chevron shares, about $300 million in BP and $50 million in Shell. While the fund had sold off most assets in coal and oil sands—a particularly polluting source of oil from Canada—it still held about $1.5 million in Arch Resources, the second largest U.S. coal producer, and $26 million in Suncor Energy, a leading oil sands company. The comptroller’s review of independent oil and gas companies resulted in initial restrictions on 21 firms, half of those examined. 

Dunlea pointed to a what he called a gap in the review, in that it is unclear how the comptroller’s office will account for nearly $110 billion invested in public and private equity funds, rather than directly in stocks or bonds. Many of those funds have holdings in fossil fuel companies. A 2021 review by the Institute for Energy Economics and Financial Analysis, a clean energy think tank, found that one of New York’s private equity holdings was a co-owner of one of the nation’s dirtiest coal plants. Some of the public equity funds held by the pension fund hold shares not only in major oil companies but also in some of the firms that New York has restricted, like Canadian Natural Resources, an oil sands producer. In that sense, the state fund could continue to hold large investments in fossil fuels, even if it sells the shares it owns directly.

The strongest case for divestment is financial, said Tom Sanzillo, director of financial analysis with the Institute for Energy Economics and Financial Analysis. Despite record earnings in 2022, the oil and gas industry has underperformed the broader stock market over the last five to 10 years.

“It’s a substantial decline, and none of them are doing well,” said Sanzillo, who previously served as deputy comptroller in New York. “So my general tendency is a fiduciary might want to look at getting out of all of them.”

Fossil fuel companies that remain in the pension fund’s holdings will continue to face pressure to act on climate risks, given the comptroller’s office’s annual review. Dunlea has said he will continue to keep pressure on DiNapoli, too. In testimony before the state legislature last week, he called on lawmakers to use the state budget process to force divestment.