NYC moves to drop major asset managers in climate-driven pension fund shakeup – Straight Arrow News

Report on New York City Pension Fund Divestment Strategy Aligned with Sustainable Development Goals

A strategic initiative has been proposed by the New York City Comptroller to potentially divest tens of billions of dollars from major investment firms. This action is predicated on the firms’ inadequate decarbonization plans, which fail to align with the city’s climate objectives and the broader United Nations Sustainable Development Goals (SDGs).

Alignment with Sustainable Development Goals (SDGs)

The proposed financial strategy directly supports several key SDGs, reflecting a commitment to integrating sustainability into fiduciary responsibilities.

SDG 13: Climate Action

The core of the initiative is to take urgent action to combat climate change and its impacts. By requiring asset managers to submit robust decarbonization strategies, New York City is leveraging its financial influence to accelerate the transition to a low-carbon economy. The city’s Net-Zero Implementation Plan, which aims for net-zero greenhouse gas emissions by 2040, is a tangible commitment to this goal.

SDG 11: Sustainable Cities and Communities

This action demonstrates New York City’s leadership in creating a sustainable urban environment. By ensuring its investments do not exacerbate climate risk, the city is working to safeguard its future and the well-being of its communities from the systemic threats posed by climate change.

SDG 12: Responsible Consumption and Production

The city is acting as a responsible consumer of financial services, demanding that its partners adopt sustainable practices. This pressure encourages asset managers and the companies they invest in to adopt more responsible production patterns, thereby contributing to global sustainability.

SDG 8: Decent Work and Economic Growth

Protecting the long-term value of pension funds for nearly one million public servants is a central objective. This action addresses the systemic economic risks of climate change, ensuring the financial security of beneficiaries and promoting sustainable, long-term economic growth that is resilient to environmental challenges.

Proposed Divestment and Rationale

The plan, presented by City Comptroller Brad Lander, follows a comprehensive evaluation of public market managers responsible for city pension funds.

Affected Pension Systems and Asset Managers

The proposal impacts trustees and beneficiaries of three major pension systems:

• New York City Employees’ Retirement System (NYCERS)
• Teachers’ Retirement System (TRS)
• Board of Education Retirement System (BERS)

The asset managers identified for potential mandate termination due to insufficient climate plans are:

1. BlackRock
2. Fidelity
3. PanAgora

Evaluation of Decarbonization Strategies

An assessment of 49 public market managers revealed that the strategies submitted by BlackRock, Fidelity, and PanAgora were inadequate. Specific shortcomings noted include:

• BlackRock: Ceased engagement with U.S. companies on proxy voting issues related to climate risk following changes to SEC guidance. The firm manages approximately $42.3 billion in index funds for the city’s pensions.
• Fidelity: Accused of adopting an “overly restrictive” interpretation of SEC guidance on climate-related disclosures and actions.
• PanAgora: Criticized for engagement that focused solely on emissions disclosure rather than encouraging substantive decarbonization actions.

Strategic Implementation and Fiduciary Duty

The proposed action is a key component of the city’s Net-Zero Implementation Plan, adopted by pension trustees in 2023.

New York City’s Net-Zero Implementation Plan

The plan establishes a clear framework for achieving net-zero greenhouse gas emissions across the pension portfolios by 2040. Significant progress has been reported, including a 37% reduction in financed greenhouse gases since 2019. The Comptroller has emphasized that executing this plan is a core part of the fiduciary duty to protect pension assets from the systemic risks of the climate crisis.

Responses and Future Outlook

The Comptroller’s office has indicated a willingness to continue working with the firms if meaningful changes are made to their climate strategies, stating a commitment to avoid “greenwashing.” In response, BlackRock acknowledged the ongoing dialogue and affirmed its dedication to serving the pension beneficiaries, noting that any change would be subject to a thorough review process involving all stakeholders.

Analysis of Sustainable Development Goals in the Article

1. Which SDGs are addressed or connected to the issues highlighted in the article?

• SDG 13: Climate Action

  This is the most central SDG in the article. The entire narrative revolves around New York City taking financial action against investment firms due to their “perceived lack of action on climate change.” The city’s “net-zero implementation plan” and the goal to achieve “net-zero greenhouse gas emissions by 2040” are direct efforts to combat climate change and its impacts.

• SDG 11: Sustainable Cities and Communities

  The article highlights actions taken by a specific city, New York City, to manage its assets and environment sustainably. The Comptroller’s plan is designed to align the city’s pension fund investments with its municipal climate goals, specifically the “city’s Net Zero by 2040 goals,” thereby contributing to making the city more sustainable and resilient.

• SDG 12: Responsible Consumption and Production

  This goal is addressed through the city’s effort to promote corporate accountability and sustainable practices. By threatening to pull “tens of billions of dollars in pension funds,” NYC is using its financial leverage as a consumer of investment services to pressure large transnational companies (BlackRock, Fidelity, PanAgora) to adopt responsible decarbonization plans and integrate climate risk into their strategies, moving towards more sustainable patterns of production in the financial sector.

• SDG 17: Partnerships for the Goals

  The article describes a multi-stakeholder partnership in action. It involves a public entity (the NYC Comptroller’s office) collaborating with the city’s pension systems (NYCERS, TRS, BERS) to engage with and influence the private sector (investment management firms). This public-private engagement uses financial resources and strategic leverage to achieve a common sustainable development objective.

2. What specific targets under those SDGs can be identified based on the article’s content?

1. Target 13.2: Integrate climate change measures into national policies, strategies and planning.

   Although this target refers to national policies, its principles are directly applicable at the sub-national level. The article details New York City’s “net-zero implementation plan,” which was adopted by its pension fund trustees in 2023. This plan is a clear example of integrating climate change measures into institutional strategy and financial planning to achieve the goal of “net-zero greenhouse gas emissions by 2040.”

2. Target 11.b: By 2020, substantially increase the number of cities and human settlements adopting and implementing integrated policies and plans towards inclusion, resource efficiency, mitigation and adaptation to climate change…

   New York City’s “net-zero implementation plan” is a direct example of an integrated policy aimed at climate change mitigation. The article shows the city is not just adopting but actively implementing this plan by evaluating its asset managers and taking action based on their alignment with the city’s goals.

3. Target 12.6: Encourage companies, especially large and transnational companies, to adopt sustainable practices and to integrate sustainability information into their reporting cycle.

   The core action described in the article is an effort to encourage large financial firms to adopt sustainable practices. The city’s plan “required all public equity and corporate board managers to submit decarbonization strategies.” The criticism of PanAgora for failing “to encourage companies to take decarbonization actions” and the potential divestment from BlackRock and Fidelity for having plans that were “not good enough” directly align with this target.

4. Target 17.17: Encourage and promote effective public, public-private and civil society partnerships…

   The initiative led by the NYC Comptroller represents a public-private partnership. The Comptroller’s office, a public body, is using the financial power of public pension funds to influence the climate policies of private investment firms. The article details the engagement process, including evaluations and responses from firms like BlackRock, illustrating this partnership dynamic in action.

3. Are there any indicators mentioned or implied in the article that can be used to measure progress towards the identified targets?

• Greenhouse Gas Emissions Reduction

  The article explicitly states a key performance indicator: “a 37% reduction in financed greenhouse gases since 2019.” This quantifiable metric directly measures progress towards the city’s net-zero goal and is a primary indicator for SDG 13 and SDG 11 targets related to climate mitigation.

• Corporate Adoption of Decarbonization Strategies

  An indicator for Target 12.6 is the number of companies adopting and reporting on sustainable practices. The article implies this by stating that an “evaluation of 49 public market managers” was conducted, and that 46 of them “submitted sufficient plans.” The adequacy of these plans serves as a qualitative indicator of corporate commitment to decarbonization.

• Mobilization of Financial Resources

  An indicator for SDG 17 is the mobilization of financial resources for sustainable development. The article quantifies the financial leverage being used, noting that “BlackRock manages $42.3 billion in index funds for those pension funds.” This figure represents the scale of the financial resources being directed to encourage climate action.

4. Create a table with three columns titled ‘SDGs, Targets and Indicators” to present the findings from analyzing the article.

Source: san.com