Letter to Hon. Thomas DiNapoli, Comptroller of New York State - Tenney Urges NYS Comptroller DiNapoli to Divest NY Pension Fund from Chinese Companies

Letter

Dear Comptroller DiNapoli,

I commend you for directing the New York State Common Retirement Fund ("NYSCRF") to cease acquiring new holdings in Russian companies and engaging in a divestment review of current investments. Our public pension funds have a moral obligation not to be a source of capital for Vladimir Putin's aggression and war crimes against the Ukrainian people. Furthermore, full divestment will protect retirement fund beneficiaries and their families by reducing the approximately $110.8 million in current exposure of public equity investments in Russian companies.

While this decision marks a significant show of support for the people of Ukraine, we can and must do more to combat our economic integration with authoritarian regimes that pose significant and direct threats to the free world, American national security, and our economic prosperity. As such, I urge you to take similar steps to also divest the New York State Common Retirement Fund's holdings in Chinese companies.

As of May 5, 2021, there were a total of 248 Chinese companies listed on the New York Stock Exchange, NASDAQ, and NYSE American. The combined market capitalization of these entities totals $2.1 trillion. While all companies listed on American stock exchanges, both foreign and domestic, are by U.S. law subject to audit reviews by the Public Company Accounting Oversight Board (PCAOB), Chinese companies have systematically flouted this rule and ignored this important investor protection measure. As a result, Congress passed the Holding Foreign Companies Accountable Act, to delist PCAOB non-compliant firms. When this bill was signed into law in late 2021, a three-year countdown to delisting began. NYSCRF's exposure to firms that may soon be kicked off American stock exchanges is a significant risk factor.

New York State's failure thus far to reduce NYSCRF's exposure to the domestic Chinese market is a violation of your fiduciary duty to the over 1.1 million members of the New York State and Local Retirement System. Beyond the total lack of transparency into Chinese companies, the Chinese economy lacks the most basic practices and mechanisms of voluntary exchange and rule of law to safeguard investors. The Chinese market is controlled by the Chinese Communist Party. Further, many of your portfolio companies may be directly contributing to illegal or otherwise destabilizing activities, including but not limited to supporting atrocities against the Uyghur population, the build-up of the Chinese military, and unfair trade practices that have decimated our industrial base, including my Upstate district.

Unfortunately, NYSCRF seems to be moving in the wrong direction. Just last spring, NYSCRF approved over $38 million in capital commitments to China-focused investments such as the Boyu Capital Fund V, Boyu Capital Growth Fund I, the 5Y Capital Growth Fund I, and the 5Y Capitol Evolution Fund II. Such investments are completely unacceptable and encourage the engagement in human rights abuses across the globe. The Chinese government and Communist Party have positioned themselves as fierce adversaries of the United States for decades. It is time that we meet this opposition head on, including with much needed divestment.

At the same time that NYSCRF may be fueling the Chinese Communist Party's malign activities, you have stated your intention to divest $238 million in shares and bonds from 21 oil and gas companies, including U.S. based firms like ConocoPhillips, Pioneer Natural Resources Co. and Hess Corp. for their failure to demonstrate viable net-zero transition plans. These U.S. companies provide high-paying jobs to American workers, including many New Yorkers. Moreover, they are absolutely essential to our energy independence ranking third, seventh, and tenth, respectively among oil and gas companies. It defies logic that under your management, the NYSCRF is focused on penalizing American companies in good standing, while turning a blind eye to investments in companies so closely tied to the Chinese Communist Party.

Further, such behavior is grossly hypocritical. China persistently emits carbon dioxide at a rate more than twice that of the United States, while simultaneously constructing coal-fired power plants faster than any renewable sources of energy. It is therefore difficult to understand why U.S.-based oil and natural gas companies are subject to multi-million-dollar divestments for failing to meet New York State's environmental standards, yet CCP controlled companies are held to no such obligation by the retirement fund. This is a glaringly obvious double standard that I hope you will examine and reconsider for the sake of your fund's integrity.

The hard-working members of the New York State and Local Retirement system deserve to have their assets administered in a morally and fiscally responsible manner. No one should be profiting from the human rights violations of Russia or China, and New York State must immediately work to divest entirely from both nations. Thank you for your time and consideration in this matter.

Sincerely,

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