NYC Pension Funds May Ramp Up Fossil Fuel Divestment

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New York City’s pension funds, fresh off a court victory over their divestment from fossil fuels in their publicly-traded securities portfolio, are considering even broader bans.

On Tuesday, New York City Comptroller Brad Lander announced his support of a policy that bars future investments in midstream and downstream fossil fuel infrastructure.

Previously Lander and the trustees of the New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System (TRS), and Board of Education Retirement System (BERS) divested from fossil fuel reserve owners in their public equities portfolio and voted last year to exclude upstream investments — exploration and extraction — in their private markets portfolios.

The new policy, which still has to be adopted by trustees, would include a prohibition on putting new money into privately-held midstream and downstream infrastructure.

“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,” said Lander in a statement. “The impacts of the climate crisis are playing out in real time, with more frequent hurricanes, flash floods, intense heat waves, and deteriorating air quality jeopardizing our planet and our portfolios. Excluding pipelines and LNG [liquified natural gas] 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.”

New York is the first large U.S. public pension system that has divested from both its active and passive publicly traded fossil fuel portfolio. Climate activists called its new action “a groundbreaking move that opens the door to pension funds in New York State and beyond to follow suit.”

The pension funds have also led shareholder campaigns that “persuaded J.P. Morgan Chase, Citibank, and Royal Bank of Canada to disclose the ratio of green to fossil fuel financing, with the goal of making this a sector-wide standard that supports the energy transition on a Paris-aligned timeline,” according to the statement.

But as banks have retreated, private equity has filled the void. “Private equity firms have … invested hundreds of billions of dollars into dirty energy projects with little to no oversight,” said Melanie Kruvelis, senior climate finance organizer at Strong Economy for All.

The Sierra Club lauded the policy as helping to address “the growing role of private market investments in financing dirty fossil fuel projects and enabling major polluters that operate with little transparency.”

Despite the funds’ prior divestment actions, overall investments in energy and climate solutions have grown to over $11 billion, nearly three times the value of the funds’ holdings in fossil fuel reserve owners prior to 2021.

The funds’ trustees are expected to vote on the new policy in 2025, after receiving an assessment of its implications and impacts.