Banning New Jersey’s public-worker pension fund from holding stakes in major fossil-fuel companies will be up for discussion Thursday as climate change takes center stage during a joint meeting of the Legislature’s environment committees.

If enacted, the measure would add the state pension fund to a growing list of institutional investors taking action against fossil-fuel companies in response to concerns about a warming climate and the role played by burning fossil fuels.

Environmentalists and climate activists in New Jersey have for years been calling for fossil-fuel divestment, citing the serious, and sometimes deadly, impacts of climate change that have already been felt in the state. These include significant coastal flooding, heat waves and other extreme weather.

‘We’re talking about the end of the human race as we know it … This is existential in the classic sense of the word.’ – Sen. Bob Smith

The divestment bill is only up for discussion during Thursday’s legislative climate-change hearing, which is planned to be held in Toms River. But Senate Environment and Energy Committee Chair Bob Smith (D-Middlesex) said it will serve an important purpose as lawmakers seek to raise awareness about the severity of the issue.

“We’re talking about the end of the human race as we know it,” said Smith, a primary sponsor of the divestment bill, during an interview Wednesday.

“This is existential in the classic sense of the word,” he said.

Bailing on fossil fuels

A widespread push to divest all fossil-fuel investments held by major institutional investors such as pension funds and university endowments has been picking up steam nationally in recent years. It comes amid growing concerns about climate change and the role that fossil fuels have played in rising temperatures and sea levels.

Proponents of fossil-fuel divestment also argue that such investments are no longer sound, long-term strategies, even for a state like New Jersey that is carrying a large unfunded pension liability.

Earlier this year, Gov. Phil Murphy and lawmakers took swift action to prohibit state pension-fund assets from being invested in companies with close ties to the governments of Russia and Belarus. That came in response to Russia’s ongoing invasion of Ukraine, which has been supported by close ally Belarus.

But lawmakers in recent years have shown far less urgency when it comes to considering legislation that calls for divesting stakes the pension fund may have in major fossil-fuel companies.

Legislative records indicate a version of the pension-fund fossil-fuel divestment bill has been introduced during each of the Legislature’s last four, two-year sessions. But the measure has yet to be put up for consideration in any committee in either the Assembly or Senate, according to those records.

It’s also unclear where Murphy, a second-term Democrat who promotes his green-energy agenda, stands on the issue of fossil-fuel divestment. His office declined comment when asked about the bill that will be discussed during Thursday’s meeting, which will also focus on issues related to coastal resiliency and the state’s renewable-energy standards, among other topics, according to the agenda.

Discontent with carbon content

Under the latest version of the divestment bill, the Department of Treasury’s Division of Investment would be barred from putting state retirement funds in “any of the top 200 companies that hold the largest carbon-content fossil-fuel reserves.”

The state’s pension-fund managers would also be required to identify all companies that would be subject to the proposed investment ban and report annually on any progress the state has made in shedding stakes in fossil-fuel companies.

“The State will stand, with a host of other institutions across the country, against profiting from companies that are accelerating climate change by removing those companies from its pension and annuity funds portfolio,” the bill says.

Several years ago, at the urging of climate activists in New Jersey, state pension officials conducted an in-house review of what could happen if New Jersey decided to eliminate all the pension fund’s financial ties to fossil-fuel companies.

‘It is our tax dollars, our health and safety and our futures that are on the line here … Fossil fuels are literally killing us.’ — Tina Weishaus, Divest NJ coalition

The review acknowledged that “business risk may support a transition to renewable energy over a long-term investment horizon.” But it also determined that even as renewable energy sources and electric vehicles grow in popularity, demand for fossil fuels isn’t projected to peak until “around the year 2040,” suggesting fossil-fuel investments will likely continue to be profitable.

New investments in renewable energies

Since then, pension officials have launched new investments in renewable energies and sought to engage more regularly with the executives of companies in which pension funds are invested to encourage more disclosure of climate-change policies and greenhouse-gas and emissions reports.

The state has also adopted a formal “environmental, social and governance,” or ESG, policy that is now being used whenever new investments are considered. But state pension-fund managers haven’t initiated a large-scale divestment effort in response to the ongoing activism of climate advocates who continue to speak out during meetings of the New Jersey State Investment Council.

Tina Weishaus, co-chair of the Divest NJ coalition, said it’s appropriate to give the public a chance to weigh in on the issue of fossil-fuel divestment during Thursday’s hearing.

“It is our tax dollars, our health and safety and our futures that are on the line here,” Weishaus said in a news release issued in advance of the hearing. “Fossil fuels are literally killing us.”