NYC pension funds pick advisors to help divest from fossil fuel firms

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Three of the biggest New York City pension funds have picked advisors to help them divest from fossil fuel firms, Mayor Bill de Blasio and Comptroller Scott Stringer said on Tuesday.

Last year, the trustees of the New York City Employees’ Retirement System (NYCERS), the Teachers Retirement System (TRS) and the Board of Education Retirement System (BERS) set a goal to divest city funds from fossil fuels within five years. One of the first steps that needed to be taken was to find a company or companies that would develop and implement an orderly divestment process.

The contract to advise on the divestment plan was awarded Tuesday to Meketa Investment Group for NYCERS, BERS and TRS. TRS will also contract with BlackRock Financial Management. These three funds, with total holdings of more than $155 billion, hold about $3 billion of investments in the securities of fossil fuel reserve owners.

In January 2018, the funds' trustees announced a goal to divest from fossil fuel within five years. With the award of these contracts, the funds are on track to have plans to divest in place by late thus year. By next year, the city expects the pension fund boards will adopt a divestment plan and begin its execution.

“While the Trump administration fails to address global warming as the crisis it is, New York City is taking action,” de Blasio said. “We are dedicated to delivering what we owe to our children and grandchildren, which is why we’re the first in the nation to take major steps to divest from fossil fuels and invest in climate solutions.”

The city said the advisors will evaluate options and recommend actions that will “inform the development of a comprehensive and prudent divestment strategy to preserve the retirement funds of city employees and address climate change risks, consistent with fiduciary duty.”

Looking ahead, the Comptroller’s Office Tuesday released a notice of search to find managers that will help the funds make investments in climate solutions. The funds will choose public markets investment managers to invest the divestment monies in companies that will generate revenue from climate mitigation, adaption and resiliency, all of which support the Paris Agreement on climate goals.

“New York City is standing up for our people, our pensioners, and the only planet we have because the future is on the side of big ideas in clean energy — not big polluters,” Stringer said. “Climate change is the most pressing challenge of our time, and we need to meet our climate emergency with every tool at our disposal to protect our children and our children’s children. In accordance with our fiduciary duty, the trustees are taking the next major step in our first-in-the-nation divestment goal and leading the charge toward a clean, green and sustainable economy.”

The funds aims to double investments in solutions such as wind, solar power and energy efficient buildings to over $4 billion by 2021.

“Confronting our climate crisis requires bold action and leadership. By divesting from fossil fuels and investing in climate solutions, New York City is demonstrating a Green New Deal to the world and protecting the retirements of the City workforce,” said Daniel Zarrilli, NYC’s chief climate policy advisor. “We encourage all investors to follow our lead so that we can end the age of fossil fuels and secure a livable future for the next generation. Thanks to the pension trustees for their continued leadership.”

The city has five pension funds. The other two funds are not involved in the divestment action; they are the Police Department and Fire Department pension funds.

New York City is one of the largest issuers of municipal debt in the United States. Its proposed budget for fiscal year 2021 is $95.3 billion. Moody’s Investors Service rates the city's general obligation bonds Aa1 and S&P Global Ratings and Fitch Ratings rate it AA. All three rating agencies assign stable outlooks to the GOs. As of the end of the second quarter of fiscal 2020, the city had about $37.7 billion of general obligation debt outstanding. That's not counting the various city authorities that issue debt.