Banking and Finance Law Daily Wrap Up, FINANCIAL STABILITY—NYC Comptroller seeks to expand ban on pension fund fossil fuel investments, (Oct 23, 2024)

By Nora Macaluso

Climate advocates praised the plan, saying it could set a precedent for funds across the country and abroad.

New York City Comptroller Brad Lander said he supports a ban on investments in midstream and downstream fossil-fuel infrastructure by city pension funds. Three of the city’s public funds—the New York City Employees’ Retirement System, Teachers’ Retirement System, and Board of Education Retirement System—have already divested their holdings in fossil fuel reserve owners, and voted last year to exclude upstream fossil fuel investments, Lander’s office said. The comptroller’s office said the proposed policy would expand that to prohibit future investments in midstream and downstream infrastructure, such as pipelines and liquid natural gas terminals.

“Climate risk is financial risk, and we have a fiduciary duty to our beneficiaries to take that risk seriously as we make long-term investment decisions,” Lander said. “Excluding pipelines and LNG terminals from future investments will help mitigate the systemic risks that climate change poses to the global economy and to New York City’s public pension funds.”

The comptroller’s office said the exclusions are part of the funds’ Net Zero Implementation Plans, adopted in 2023. The plans call for annual disclosure of certain emissions, engagement with portfolio companies and asset managers aimed at reducing emissions, and scaling up investments in renewable energy and climate solutions.

The Comptroller’s Bureau of Asset Management will craft policy language and present it to the trustees of the three funds in early 2025.

“The private equity sector has proven to be an important asset for institutional investors like the New York City pension funds,” said former New York State first deputy comptroller Tom Sanzillo, director of financial analysis at the Institute for Energy Economics and Financial Analysis. Fossil fuel companies “remain a sector in secular decline,” with midstream and downstream companies holding just 3.3% of the market, down from 28% in 1980, he said.

Americans for Financial Reform (AFR) joined other environmental groups in lauding the move. The three funds, representing $207 billion in assets, would be the first in the U.S. to make such a commitment, “setting precedent for funds across the country and around the world to follow suit,” AFR said.

“This is a groundbreaking move that opens the door to pension funds in New York State and beyond to follow suit,” said Cassie Cain, climate finance campaigner with Stand.earth. “Just like when the Comptroller’s office announced its intention to divest from publicly traded fossil fuel companies, we expect others to step up and take similar action. This is the power of New York City.”

“The Sierra Club and New Yorkers are grateful to see Comptroller Lander and New York City pension trustees continuing to prioritize worker’s long-term savings by taking action to mitigate the climate crisis and its economic impacts,” said Sierra Club Acting Deputy Executive Director Loren Blackford. “With the impacts of climate change becoming ever-clearer, it’s never been more urgent to stop financing the industries that drive the crisis, which threatens our economy and so many people’s retirement security,” Blackford said.

Companies: Americans for Financial Reform; Sierra Club; Stand.earth

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