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CGS Director Nathan Hultman Provides Testimony for Hearing on Maryland Pension Climate Change Risk Act

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Nathan Hultman

On February 22, Center for Global Sustainability Director Nathan Hultman provided testimony at a hearing on the Maryland Pension Climate Change Risk Act. The hearing was held by the Maryland House Appropriations Committee. Hultman's testimony was as follows. 


Testimony on House Bill 993

Maryland Pension Climate Change Risk Act

Prof. Nathan Hultman

Director, Center for Global Sustainability

School of Public Policy

University of Maryland


Presented to

The Appropriations Committee

Maryland General Assembly

Annapolis, Maryland

February 22, 2018


Thank you for the invitation to testify today.

The Maryland State Retirement and Pension System (SRPS) currently manages over $47 billion in assets on behalf of 380,000 members across numerous state and local government agencies. State pension funds such as Maryland’s invest funds in a broad swath of the global economy. Climate change poses real risks to those investments in a number of ways, including direct impacts from weather events, loss of competitiveness for companies in affected industries, and legal liability for the mismanagement of such risks. These risks create a vulnerability for Maryland—and all states with long term obligations to their residents and employees.

Pension funds have to manage returns for the long term so as to ensure they fulfill the promises made to employees who may be decades from retirement. Thinking about the future—and new financial risks—is therefore one of their most important responsibilities. Recent hurricanes and wildfires in the United States have underscored that climate change has become a new source of major financial risk, which will almost certainly grow in coming decades. To date, however, the Maryland pension fund has not responded comprehensively to this challenge, even as tidal flooding has become a regular feature in parts of Annapolis just blocks away from these government offices.

Pension funds in other jurisdictions have begun addressing both these risks resulting from climate change impacts and policies. In June of this year, a task force of international financiers, led by former New York Mayor Michael Bloomberg, issued a report highlighting these risks and the need for greater disclosures. To its credit, Maryland’s SRPS did contribute to some early thinking with other pension funds about how to deal with climate change in investment decisions, and has taken some initial steps to engage in proxy voting. However, more can and should be done, both individually and in concert with other pension funds and long-term asset holders.

In a study1 recently released by our center and on which I was co-author, we identified some of the areas for potential improvement. The Maryland SRPS could, for example, learn from other states’ pension management practices and incorporate these into the System’s framework. The California Public Employees’ Retirement System (CalPERS) and the New York State Common Retirement Fund (NYSCRF) have commissioned reports to analyze their portfolio’s climate risks and, with other shareholders, have voted for the approval of climate change resolutions for five major energy companies. Internationally, the European Parliament passed a law requiring pension funds to consider and report on the environmental, social and governance risks (including climate risks) of their investments. France adopted mandatory climate risk reporting requirements for all institutional investors, including pension funds. Other tools used in U.S. States include proxy voting to place climate risk experts on corporate boards and shifting capital to companies with lower emissions. They are also looking at the opportunities for returns from green energy technologies and products that enhance resilience to climate impacts.

The first and most critical step is to openly acknowledge the significance of the risks and an intent to address them comprehensively, a process that I commend the you all for engaging in. Well-established best practices for managing climate risk involve clarifying investment guidelines and philosophy with respect to climate change, risk assessment, active ownership, asset reallocation, and transparency. The Maryland SRPS has initiated some of these best practices but has considerable room to do more. On transparency, for example, the Asset Owners Disclosure Project gave SRPS a “D” ranking for 2017 meaning “Bystander,” tying for 218th out of 500 asset owners indexed. As such, the Maryland House Bill 993, “The Maryland Pension Climate Change Risk Act,” would direct the State of Maryland to implement actions consistent with the above good practices identified in our study, for example by clarifying investment guidelines, assessing climate risks, and enhancing corporate engagement and transparency.

Maryland’s action on this issue is important not to lead on a topic relating to our own vulnerability to climate change—which itself is an important goal. But it is also, and centrally, about our interest in ensuring we act in a responsible way to protect our investments on behalf of all Marylanders. These few basic steps can bolster our ability to implement investment policies in line with our fiduciary duties, further advance our state as a national leader, and reflect the best scientific understanding of the risks that climate change presents to Maryland’s citizens, investments, economy, and natural areas.


1 “Climate Change Risk and the Maryland State Retirement and Pension System.” Center for Global Sustainability, University of Maryland, October 2017. Available at

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