New York City may soon pull tens of billions of dollars in pension funds from some large investment firms due to a perceived lack of action on climate change. City Comptroller Brad Lander released a new plan that would remove several major investments in large financial companies over their decarbonization plans.
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Pension change
Lander’s plan would update trustees of the NYC Employees’ Retirement System (NYCERS), the Teachers’ Retirement System (TRS), and the Board of Education Retirement System (BERS). There are nearly 1 million people in those systems.
The new plan would rebid investment management firm BlackRock’s public equities index mandates and end the mandates of active plan managers Fidelity and PanAgora.
This potential move comes after an evaluation of 49 public market managers for those pension plans. The other 46 submitted sufficient plans to align with New York City’s net-zero implementation plans to achieve net-zero greenhouse gas emissions by 2040.
BlackRock, Fidelity and PanAgora’s plans were not good enough.
“Today, I am calling on my fellow trustees to move our money away from the three asset managers – BlackRock, Fidelity and PanAgora – who fail to address climate risk with the seriousness we expect,” Lander said.
BlackRock manages $42.3 billion in index funds for those pension funds.
“The New York City Bureau of Asset Management (NYC BAM) is staffed by a world-class investment team that is dedicated to serving the beneficiaries of New York City’s five public pension plans with the highest levels of integrity and professionalism,” Armando Senra, BlackRock’s managing director, said in a response to Lander. “Over the past several months, we’ve had multiple conversations with the investment team regarding NYC BAM’s investment and decarbonization objectives. As with all of our clients, we’ve been eager to deepen our understanding of NYC BAM’s needs and collaborate on how we can best protect the retirement security of the 750,000 people who rely on the five pension plans served by NYC BAM.”
Net-zero implementation plan
Trustees of those three pension sources adopted the net-zero plan in 2023.
Lander said there’s been significant progress made in reaching those goals, including a 37% reduction in financed greenhouse gases since 2019.
“The systemic risk of the climate crisis threatens the long-term value of New York City’s pension funds,” Lander said. “Our net zero plan is a core part of our fiduciary duty to protect these assets.”
That plan required all public equity and corporate board managers to submit decarbonization strategies by June.
“It’s encouraging to see New York City’s comptroller using financial leverage to push those institutions toward aligning investments with the city’s Net Zero by 2040 goals,” Gang He, associate professor of energy and climate policy at Baruch College, told Straight Arrow News.
Trump involvement
Lander also noted President Donald Trump’s changes to the Securities and Exchange Commission’s (SEC) requirements that public companies disclose greenhouse gas emissions and other climate-related risks.
After that move, BlackRock reportedly stopped engaging with U.S. companies on proxy voting issues when it owned at least a 5% stake.
Lander’s office also said Fidelity has taken an “overly restrictive” interpretation of that SEC guidance.
With PanAgora, Lander said their engagement only took the form of disclosing emissions and failed to encourage companies to take decarbonization actions.
The release said they are still open to working with these companies if changes are made.
“The Office is committed to working with the industry to reach a mutually agreeable outcome on this issue, but cannot accept a methodology that would enable ‘greenwashing,’” the release said.
BlackRock said any changes to the current setup would not come quickly.
“Any change to one of the five pension plan portfolios would be subject to a review process involving the plan’s Board, the NYC BAM investment team, and other relevant stakeholders,” Senra said. “Should they take up your recommendation, we look forward to demonstrating the breadth and depth of our capabilities and the tremendous value we deliver to NYC BAM and 750,000 dedicated public servants.”
