New York City officials hope to lay a marker with their move to double green-related investments by the city’s five pension funds.
“It builds momentum for bigger and bigger solutions,” Mayor Bill de Blasio said Thursday as he and city Comptroller Scott Stringer announced a goal to double the funds’ investments to $4 billion, or 2% of the $195 billion pension portfolio over three years, in renewable energy and energy efficiency.
De Blasio spoke as Hurricane Florence began to hammer the Carolinas. On Friday, the mayor was scheduled to address the Global Climate Action Summit in San Francisco, where wildfires have ravaged the surrounding region.
“California is literally burning, and that’s because of climate change, too,” de Blasio told reporters at the Building Energy Exchange on Chambers Street.
New York’s initiative also comes as the sixth anniversary of Hurricane Sandy nears. The storm killed 44 people and caused an estimated $19 billion worth of damage within the city.
The mayor in January
De Blasio and London Mayor Sadiq Kahn called on cities worldwide to divest assets from fossil-fuel companies. If the pension funds boards approve the initiative, New York would be the first U.S. city to commit 2%.
The funds are the New York City Employees’ Retirement System; the Teachers’ Retirement System of the City of New York; the New York City Police Pension Fund; the New York City Fire Pension Fund; and the New York City Board of Education Retirement System.
This could open the window for other major pension funds as Apple Corp. did for corporations with its $1.5 billion green bond in 2016 -- the largest by a U.S. corporation – following the 2015 Paris climate agreement. Apple also offered a $1 billion bond last year, after President Trump withdrew the U.S. from the Paris accord.
“This will change the way in which the cities the size of New York, and other cities, approach this,” said Alan Rubin, a partner at Blank Rome LLP. “Now they have permission, if you will, to move forward.”
Stringer called doubling the investment over three years a reasonable goal.
“We think that we’re not simply doubling by asset class, but we’re going to be participating in all the asset classes, and we think we have a road map forward,” he said.
“We think we can customize some of the indexes for more sustainability.”
Getting de Blasio and Stringer on the same page is important, according to Rubin. Stringer’s 2014 green bonds
“Remember, de Blasio was pushing back on green bonds until now. Stringer has been trying to do it forever,” said Rubin. “Something changed and I think it was the amount of green bonds they’re selling.”
Stringer said the city has received 20 responses to a request for interest on legal matters, with trustees to hear proposals by the end of the month. The city would then issue a request for proposals later in the fall.
“So we are on a fast pace, an accelerated pace, but I like where we are,” he said.
Teachers and NYCERS combine for about 70% of the pension funds’ portfolio.
The City Council is considering a bill that would require buildings reduce carbon emissions by 20% between 2020 and 2030. Major developers including SL Green Realty, Vornado Realty Trust and Related Cos. are on board conceptually.
According to de Blasio, the top 50 U.S. pension funds investing 2% could convert half the homes nationwide to solar power.
“To anyone who might be tempted to be cynical – I can name so many times in history where a goal was set that seemed impossible at the outset and was reached in just a few years,” the mayor said, pointing to the $15 minimum wage.
Divesting from Big Carbon would take some time, said Michael Mulgrew, president of the United Federation of Teachers, who cited the gradual pullout from gun manufacturing.
“Usually about three to four years to get it, two to four years really,” he said. “We believe those investments [fossil fuels] are going to be very, very bad in a short period of time, which is why we have also said we would like to get out. But it has to be done in a responsible way.”
The move makes sense from a pension perspective, Rubin said. “The investment return is at a higher rate.”
