Stockholm (NordSIP) – On April 21st, the office of Thomas P. DiNapoli, the New York State Comptroller, announced that the New York State Common Retirement Fund restated its commitment to fighting climate change through a number of financial decisions. Taken together with the recent efforts of the New York City Comptroller Brad Lander, the announcement suggests that New York is presenting a united municipal and state front against Donald Trump’s anti-ESG agenda.
New York’s resistance is in two parts. On the one hand, DiNapoli committed an additional approximately US$2.4 billion to three funds as part of its Sustainable Investments and Climate Solutions (SICS) Program. On the other hand the New York State Comptroller has made it clear that exclusions are on the table, an approach which echoes the recent announcement from Lander
“Climate change poses a real threat to our investments, but the actions announced today will help position the Fund to address those risks and seize on opportunities generated as the world transitions to a low-carbon economy,” DiNapoli said. “The Fund is a leader on addressing the investment challenges posed by climate change and our efforts continue. Over one million members and beneficiaries depend on the Fund’s long-term strength for a secure pension. These latest investments continue our commitment to prudently reduce risks to our portfolio and protect the Fund.”
New Sustainable Investments
To date, the New York State Common Retirement Fund has deployed over US$26.5 billion, toward its goal of US$40 billion, to specific investment opportunities in the SICS Program. The Fund has made commitments to the SICS Program across asset classes including public equity, fixed income, private equity, credit, real assets and real estate.
The investments announced today include US$2 billion to the FTSE Russell TPI 1000 Climate Transition Index, US$250 million to the Oaktree Power Opportunities Fund VII and US$150 million to the Vision Ridge Partners Sustainable Asset Fund IV.
The FTSE Russell TPI 1000 Climate Transition Index is an index fund that examines companies’ fossil fuel reserves, carbon emissions, green revenues, management quality and carbon performance. The index is designed to reflect the performance of global and diversified indices, weighted to account for the risks and opportunities related to climate change. This latest investment follows a US$2 billion commitment to this strategy by the New York State Common Retirement Fund in 2021.
The Oaktree Power Opportunities Fund VII is a fund targeting investments supporting infrastructure, including electric power, solar, and water systems, through investments in ageing infrastructure, energy efficiency, and renewable energy, primarily in North America.
The Vision Ridge Partners Sustainable Asset Fund IV is a fund targeting investments focusing on climate mitigation and adaptation through identifying, developing, and transforming assets across energy, transportation, and agriculture, primarily in North America.
Exclusions
DiNapoli also announced that the Fund has completed its annual review of thermal coal, oil sands, shale oil and gas, and integrated oil companies, which is part of its broader review of the transition readiness of energy sector investments that face significant climate risk.
The Fund will continue to restrict its investments in 39 coal, oil sands, and shale oil and gas companies and has newly restricted investment in eight coal and shale oil and gas companies that the Fund has determined are not prepared for the transition to a low-carbon economy.
The Fund will not directly purchase or directly hold debt or equity securities, or invest through an actively managed account or vehicle, in these restricted companies. The newly restricted securities, valued around $31.1 million, will be sold by the Fund in a prudent manner. However, eleven coal and shale oil and gas companies were removed from the restricted list.
These decisions follow the recent discussion of using divesting from certain asset managers who refuse to improve climate reporting by Brad Lander, the New York City Comptroller, the municipal counterpart to DiNapoli’s office. According to an announcement by Lander reiterating the city’s commitment to net-zero carbon emissions, asset managers should meet minimum requirements, including:
- Engage portfolio companies to drive real economy decarbonization, not just portfolio decarbonization
- Incorporate material climate change-related risks and opportunities in investment decision-making
- Ensure a robust and systematic stewardship strategy that addresses prioritization and escalation of engagement and voting to advance decarbonization.
Asset managers should also set minimum expectations for all portfolio companies to:
- Measure and report Scopes 1, 2, and material Scope 3 emissions
- Set clear goals to reach Net Zero by decreasing their scope 1, 2, and 3 emissions
- Adopt a clear transition plan to achieve Net Zero detailing how the company will meet its short-, medium- and long-term climate goals
- Align future capital expenditures and lobbying with climate goals and targets
- Consider the impacts from transitioning to a lower-carbon business model on workers and communities .
These announcements follow divestment decisions from AkademikerPension and the UK’s People’s Pension Master Trust presumably based on the perception that asset managers were not appropriately committed to sustainable investments.
