NYC pension funds reaffirm their dedication to climate action, doubling down on their promises for sustainable investments.
New York City Pension Funds Embrace Climate-Focused Stewardship
In a significant move towards addressing climate change, the New York City pension funds have been actively implementing measures to enhance their risk management, improve investment returns, and advance a strong stewardship agenda focused on sustainability and equity.
Last year, the funds reached agreements with JPMorgan, Citi, and the Royal Bank of Canada to disclose their energy financing ratios. JPMorgan became the first major US bank to publish these figures in 2024. The New York City Comptroller, Brad Lander, has been a driving force behind these initiatives, pledging to increase climate disclosures and step up investments in climate solutions.
Under Lander’s leadership, the city’s five pension funds have integrated responsible investing principles to mitigate financial risks related to climate change. The funds are working towards scaling up their investments in climate solutions and aim to reduce the carbon footprint of their portfolios to net zero by 2040.
NYCERS, one of the New York City pension funds, plans to invest $17bn in climate solutions by 2035 and has already deployed $4.47bn. The largest of the funds, TRS, has pledged to invest $19bn in climate solutions by 2035 and has already deployed $5.9bn.
The stewardship agenda under Comptroller Lander includes a roadmap for pension funds to reach net-zero portfolio emissions by 2040, the adoption of Responsible Property Management Standards, increased investments in minority- and women-owned asset managers, and a focus on economically targeted investments that align financial returns with social and environmental benefits.
The New York City pension funds are also pursuing an active stewardship agenda, with a focus on engaging with banks and aligning stewardship practices with asset managers. The funds have divested from fossil fuel reserve owners in 2018 and have voted to exclude upstream fossil fuel investments in 2023.
Corporate 'no action requests' in the US have more than doubled over the past two years, with 217 filed in 2024 compared to just over 100 in 2023, reflecting the growing concern over climate risk. The New York City pension funds have exceeded their interim targets for reducing Scope 1 and 2 financed emissions by more than 30%.
Despite the challenges, the New York City pension funds have shown that climate-focused stewardship is both prudent and profitable. The positive financial performance coupled with these responsible investment strategies signals a promising future for the city’s pension funds.
However, the journey is not without its challenges. Some major European pension funds have divested from large US managers over a lack of stewardship alignment. Lander has criticized the US government’s retreat from climate action and the Trump administration’s departure from the Paris Agreement.
In the upcoming New York mayoral election, Brad Lander, the New York City comptroller, is a candidate. His commitment to climate-focused stewardship and his efforts to enhance the city’s pension funds could play a significant role in shaping the city’s future.
The NYC comptroller, John Adler, stated that everything they do is in the name of fiduciary duty. Climate risk, Adler emphasized, is financial risk. Lander has cited examples of extreme weather events to underscore this point. The New York City pension funds are working towards closer stewardship alignment with their external managers.
In conclusion, the New York City pension funds are leading the way in climate-focused stewardship, demonstrating that responsible investing can yield both financial returns and contribute to a more sustainable future.
The New York City pension funds have integrated environmental-science principles into their investments, aiming to scale up their investments in climate solutions and achieve a net-zero carbon footprint by 2040. In addition, they are pursuing business strategies that align with financial returns while promoting social and environmental benefits, as evidenced by their planned investments in climate solutions worth $36.47 billion by 2035.
