NYC Comptroller issues warning to managers regarding enhanced climate reporting or potential divestment risks
In a bold move towards climate action, New York City's Employer Systems (pension funds) are taking steps to ensure that their investment managers align with their ambitious climate goals. Comptroller Brad Lander has emphasized the importance of due process, stating that all asset managers are being asked to disclose and provide plans to keep their climate plans on solid legal footing.
Lander stated that the pension funds pay close attention to ensure that their climate plan can withstand legal challenges and win in court when challenged. He also mentioned that the Securities and Exchange Commission (SEC) does not dismiss their ambitions. The full conversation between Lander and Danielle Fugere is available on the latest NZI Podcast.
The pension funds, which are invested with around 300 external managers, are actively moving to divest from third-party managers who fail to meet climate stewardship expectations. This decision demonstrates a clear commitment to ensuring that fiduciaries managing public pension assets align with the city's climate goals and divest from investments that do not adequately address climate risks or pursue net-zero transition plans.
Recently, the New York City Retirement Systems joined the Net Zero Asset Owner Alliance. Private markets managers have until 30 June 2026 to meet the reporting requirement. Lander has encouraged other asset owners to join the alliance as a way to counter the prevailing shift away from climate alliances.
The pension funds, managing approximately $300bn in assets, have set a deadline of 30 June for their listed market managers to report on their climate engagement efforts. Comptroller Lander has announced that the pension funds will also divest from managers who fail to meet climate stewardship expectations, similar to the UK master trust The People's Pension's decision to divest from US manager State Street.
However, the pension funds are facing legal challenges from Republican-leaning beneficiaries over their decision to divest from fossil fuels. Many climate activists are demanding that the New York City Retirement Systems commit to divesting from BlackRock. The pension funds are under pressure from both sides of the political spectrum regarding their climate commitments.
Lander has called on asset owners to work together, stating that they will collectively burn trillions of dollars if they fail to meet the Paris goals. He emphasized that most of the pension funds are universal owners with a perpetual horizon, bearing the brunt of what will happen if they don't hit the Paris goals.
This intensified priority on climate risk management and fossil fuel divestment reflects a broader trend among public funds increasingly integrating climate risk into investment decision-making and divesting from fossil fuel exposures to protect long-term returns and sustain beneficiaries' interests.
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- Recognizing the importance of environmental-science in addressing climate-change, Comptroller Brad Lander has announced that New York City's pension funds will divest from managers who fail to meet climate stewardship expectations, aligning their investments with financial strategies that prioritize the net-zero transition plan.
- In the pursuit of meeting the Paris goals, Comptroller Lander has urged asset owners to work together, as their collective failure to address climate risks could result in financial losses amounting to trillions of dollars, ultimately threatening the long-term returns and interests of their beneficiaries.
