New York City's top financial officer this week issued standards that will be used to evaluate investment plans for the city's retirement systems that aim to meet net zero goals.
Comptroller Brad Lander adopted a "Net Zero Implementation Plan" in 2022 requiring public markets asset managers, who manage funds for New York City's retirement systems, to submit investment plans that work towards achieving net zero by 2040 to his office by 30 June. Earlier this month, his office announced that the city's pension systems lowered their greenhouse gas (GHG) emissions by 37pc and achieved their interim climate goals one year early, with much of that decline driven by divestment of fossil fuel reserve owners.
Under the standards released on 22 April, asset managers should take into account climate-related investment risks in their decision-making and work with portfolio companies to promote "real economy decarbonization."
In addition, asset managers must require portfolio companies to report and set goals to reduce their scope 1 and 2 emissions — direct emissions from sources owned by the company and from electricity purchases, respectively — as well as scope 3 emissions, or indirect supply chain emissions. Investment plans must also include short-, medium-, and long-term goals to reach net zero and ensure that future capital expenditures and lobbying align with those goals.
For plans that do not meet those standards, Lander will recommend to "put those managers' investment mandates out to bid," or begin a lengthy procurement process to contract new asset managers to manage those funds.
"Our new standards demand that the retirement systems' managers strengthen their Net Zero plans consistent with their fiduciary duty — or we will find new asset managers who will," Lander said.
The New York City Comptroller oversees five public pension funds which together form the fourth largest public pension plan in the US, with about $285bn in assets that are managed by external investment managers contracted by the city.
Lander said that threats from the federal government, including efforts to halt offshore wind, as well as President Donald Trump's executive order targeting state and local climate policy, would affect the city's ability to lower emissions and were a major reason for issuing the net zero standards.
New York City's pension systems have goals of investing $1.8-19bn in "climate change solutions" by 2035.
