New York City pensions may put more fossil fuel investments off limits

New York City Comptroller Brad Lander endorsed excluding fossil fuel infrastructure from the city's pension investments. 

Under such a policy, three New York funds would be the first large pension funds in the country to avoid all midstream and downstream fossil fuel infrastructure in their private markets investments.

"Climate risk is financial risk," Lander said at a press conference Tuesday. "It is incumbent on us as investors to take a systemic risk lens on our portfolio and make sure we are seeing what is coming, what the risks are to our planet and our portfolio from the impacts of climate change."

Donna Alberico

The New York City Employees' Retirement System, Teachers' Retirement System and Board of Education Retirement System have a combined $285 billion of assets under management, according to Lander. The funds have taken a variety of actions to lower their carbon emissions, and adopted a Net Zero Implementation Plan in 2023. 

The Comptroller's Bureau of Asset Management will present this policy to trustees of the three funds in early 2025.

The city comptroller has one seat on the board of each of the systems.

The pension funds divested from fossil fuel reserve owners in their public equities portfolio in 2022. The new policy would only concern the funds' private equity and infrastructure portfolios. 

The trustees of the pension funds voted last year to exclude upstream fossil fuel investments, such as exploration and extraction, from its private investments, according to a press release from Lander's office. Lander's proposal would broaden those exclusions to infrastructure like pipelines and LNG terminals. 

The funds would still own the private investments they already made in fossil fuel infrastructure; getting rid of them is "not our call," Lander said.

The Bureau of Asset Management doesn't yet know the value of the funds' current midstream and downstream infrastructure holdings, Lander said, and will determine that amount as part of the research and development of the proposal.

The pension funds have invested a combined $11 billion in "energy and climate solutions" as part of their net zero emissions plan, according to the press release, "nearly three times the volume of the funds' holdings in fossil fuel reserve owners prior to 2021."

NYC pension funds were involved in shareholder campaigns that "persuaded JP Morgan Chase, Citibank and Royal Bank of Canada to disclose the ratio of their green vs fossil fuel financing," according to a news release announcing Landers' proposal. 

The pension funds have tried to achieve other policy goals under Lander's comptrollership, buying affordable housing, divesting from private prisons, and setting responsible property management standards for its residential real estate portfolios. 

The New York City funds' skepticism of fossil fuel investments stands in contrast to some Republican-dominated states that have enacted policies designed to force banking and investor partners into funding oil, gas and coal industries and punishing those who don't.

"We are already a tough partner to have [for private equity and infrastructure funds], and I think that's a good thing," Lander said. "They've come to expect from us that we're going to be rigorous about workers' rights, about affordability and housing, and definitely about climate, and we believe that that makes for better businesses and better funds."