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New York City and New York State start acting on their climate related policies: exclusion vs thematic investing

New York City Pension Funds go for fossil fuel divestment whereas New York State Common Retirement Fund goes for climate-themed investments: two different but complementary approaches.

On the one hand, New York City Employee’s Retirement System (NYCERS), the Board of Education Retirement System (BERS), and the Teachers Retirement System (TRS), the Police Pension Fund, and the Fire Pension Fund, which manage altogether USD 215.5 billion, set a goal in 2018 to divest their funds from fossil fuel within five years. At the time, they had approximately USD 5 billion in fossil fuel holdings. NYCERS, BERS and TRS appointed in January 2020 Meketa Investment Group to advise them on their divestment plan. TRS also announced a contract with BlackRock Financial Management in relation to the divestment. Altogether, these three funds hold about USD 3 billion of fossil fuel reserve owners’ assets.

On the other hand, New York State Common Retirement Fund, the third largest pension fund in the US that manages around USD 210.5 billion in assets, has announced climate-themed investments of USD 800 million in January and February 2020. These investments were part of the NYS Commons’ Sustainable Investments and Climate Solutions programme announced in June last year, which plans to invest USD 20 billion by 2030. Out of the USD 800 million, USD 300 million went to private equity and USD 500 million to fixed income investments. For private equity, the funds were committed to Avenue Capital Sustainable Solutions Fund, which will focus on small and mid-cap companies in sustainable sectors including renewable energy, recycling and waste management. For fixed income, the funds were divided equally between Calvert Investments Social Investment Fund, that will focus on green bonds and affordable housing, and Nuveen Core Impact Bond Strategy, that invests across a variety of areas including renewable energy, climate change, natural resource conservation, affordable housing and economic development.

The two policies, that have different approaches on fighting climate change, are still at the start of their implementation. One should say they are not exclusionary and would need to be conducted simultaneously to have a true impact. However, they show that the main US pension funds no longer delay the implementation of their climate strategy, which will certainly help the largest fund manager to move a step forward in their response to such demand.