23 May 2024
The Minnesota State Board of Investment adopted a climate road map at its meeting on Tuesday.
“We will invest over a billion dollars in energy transition solutions over the next five years, we’ll expand our proxy voting power, and we’ll enhance our direct company engagement efforts,” said SBI executive director Jill Schurtz. “And it’s those three activities that we think fit squarely within our mission and fiduciary duty.”
The board manages $142 billion in state funds, including more than $90 billion in public employee pension plans. It has periodically faced public pressure to manage those funds in ways that promote social movements. That includes the recent call for divestment from Israel, which protesters made again at Tuesday’s meeting.
The climate plan is the result of several years of research and analysis of the potential impact of climate change. Schurtz said the board considered several options to match investments with the state’s climate priorities, ultimately rejecting a net zero approach that would divest state funds from fossil fuel companies.
Schurtz said by investing in fossil fuel companies, the state can influence their actions. One example of that investor activism is pushing oil companies to reduce flaring of natural gas from oil wells, she said.
Gov. Tim Walz chairs the board, and the members include the state auditor, secretary of state and attorney general.
Walz said balanced investing is the key to ensuring public employees’ retirement funds are protected. That means maintaining investments in traditional energy companies while expanding clean energy investments.
“If there is a proven technology that is working, we should be able to invest in those. And I think you do it in a measured manner,” he said. “It’s not all eggs in one basket, but it’s clearly showing that we are moving in that direction.”
Over the next five years, Schurtz said the board will invest about $200 million per year in energy transition industries.
“In order to get where the world needs to get to reach its climate goals, there will have to be tremendous investments made in many things, but most notably the power sector,” she said. “Seventy percent of the required investments will likely be found there.”
Another area of investment might be so-called “brown to green” industries. Those are industries that contribute to climate warming gas emissions, but can adapt their operations to reduce those emissions.
While the climate road map is a five-year plan, Schurtz said the board will reevaluate the rapidly changing energy industry each year and adjust the plan as necessary.
“It’s doing right by the people who depend on this money. And it doesn’t matter what the vector is, it could be climate, it could be something else,” Secretary of State Steve Simon said at Tuesday’s meeting. “This is just common sense by another name. You gotta look out beyond the end of your nose to a year or two years or 10 years or 20 years or 30 years, and look at what the risks are.”
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