NYC Comptroller Lander & Pension Trustees Announce Progress on Net Zero Plan, Despite Climate Retreats and Rollbacks by...

NYC Comptroller Lander & Pension Trustees Announce Progress on Net Zero Plan, Despite Climate Retreats and Rollbacks by Other Investors

New York, NY - New York City Comptroller Brad Lander and trustees of three of New York City's public pension fund boards, today announced dramatic declines in greenhouse gas emissions financed by their public equity and corporate bond investments as of the end of fiscal year (FY) 2024. Between 2019 and 2024 there was a 37% weighted average reduction in Scope 1 and 2 greenhouse gas emissions for the New York City Employees' Retirement System (NYCERS), Teachers' Retirement System (TRS), and Board of Education Retirement System (BERS). This exceeds the 2025 interim targets adopted by each system as part of their Net Zero Implementation Plan, one year ahead of schedule.

The funds have also significantly outpaced their targets for investments in renewable energy and climate solutions. The Systems' carbon footprint reduction and the FY24 10% combined net investment results that exceed the actuarial target of 7% show that divestment from fossil fuels improves climate outcomes in their portfolio without compromising returns.

"We will not retreat one inch from our strong action on climate risk, which is entirely consistent with our fiduciary duty. Climate risk is financial risk, and everyone can see it - in unprecedented wildfires, extreme flooding, and dangerously hot temperatures. Others may walk back their climate commitments and cave to the current Administration's climate denialism, but we will not be cowed," said New York City Comptroller Brad Lander.

Comptroller Lander and trustees also celebrated recent determinations by the Division of Corporation Finance of the U.S. Securities and Exchange Commission (SEC) that rejected requests from three major U.S. banks (Bank of America, Goldman Sachs, and Wells Fargo) to exclude a proposal requesting the disclosure of the banks' ratios of clean energy vs. fossil fuel financing from their proxies, thereby allowing investors to vote on the proposals at the banks' upcoming annual general meetings. The SEC excluded a number of other climate-related proposals but rejected the banks' attempt to exclude the proposals. Last year, the New York City pension systems reached agreements with JPMorgan, Citi, and the Royal Bank of Canada to disclose their energy financing ratios. JPMorgan became the first major U.S. bank to publish their data in 2024.

Today's announcement comes days after U.S. Environmental Protection Agency (EPA) Administrator Lee Zeldin announced plans to roll back 31 key environmental rules and stands in sharp contrast to the large-scale retreat of U.S.-based financial institutions from action on climate, including their withdrawal from coalitions such as the Net Zero Banking Alliance and Net Zero Asset Managers Initiative.

The Systems are industry leaders on climate action and have led historic investor efforts to address climate change in ways that maximize risk-adjusted returns. Consistent with their fiduciary duty, the Systems are committed to addressing climate change and the global systemic, as well as company-specific, risks it poses to their portfolios.

This second annual update of efforts in accordance with the Systems' 2023 Net Zero Implementation Plan is a comprehensive review of progress toward the goal of decarbonizing their investment portfolios, supporting climate transition on the timeline of the Paris Accords and reaching net zero greenhouse gas emissions by 2040. The plan builds on NYCERS, TRS and BERS' 2021 votes to divest from publicly traded fossil fuel reserve owners after studies by independent consultants concluded that doing so would avoid unnecessary risk and maximize returns. In addition to dramatic emissions reductions this year's report also highlights corporate engagement conducted by the Comptroller's Office on behalf of the Systems, record investments in climate solutions, engagement with asset managers to accelerate climate action plans, and investor action and leadership by Comptroller Lander who serves as trustee to and investment advisor and custodian for the Systems.

"We are pleased with the progress that has been made towards our net-zero goals," said Bryan Berge, representative of Mayor Eric Adams as trustee and chair of the New York City Employees' Retirement System and trustee on the Teachers' Retirement System of the City of New York. "We look forward to further substantive declines in greenhouse gas emissions, whether direct or indirect, from portfolio holdings as a result of this initiative."

"Climate change poses a systemic risk to the New York City pension systems and to the health and well-being of New Yorkers. We applaud Comptroller Lander and New York City pension trustees for acting now-ahead of schedule-to reduce emissions from the City's pension funds, and to reinvest in renewable energy and climate solutions," said Karl Palmquist, Chairperson for the Sierra Club New York City Group. "As climate change rapidly intensifies its harmful impacts on our communities, New York City's pension systems continue to lead by example-prioritizing the safety of our communities and the long-term strength of workers' retirement savings."

"In this current political context, it cannot be overstated how significant it is that three New York City pension systems exceeded their interim 2025 net zero goals one year ahead of schedule and reached a 37% reduction across Scopes 1 and 2 financed emissions. New York City's work to implement divestment of publicly traded fossil fuels continues to show that divestment is possible and prudent, and promises positive climate impacts. Pension funds and investors across the country should take note and follow suit," said Richard Brooks, Climate Finance Director, Stand.earth.

During FY24, each of the three Systems made significant progress on driving real-world decarbonization to address the systemic financial risk that climate change poses to long-term investment returns in line with the four strategies established in the original implementation plan (disclose emissions and set interim targets; engage portfolio companies and asset managers to be net zero-aligned; invest in climate change solutions; and divest to reduce risk).

DISCLOSE Emissions and Risk

NYCERS, TRS and BERS have exceeded their interim targets and yielded a total reduction of Scopes 1 and 2 financed emissions intensity in their public equity and corporate bonds portfolios (including investment grade, high yield and convertible bonds) by 34.57%, 39.51% and 28.31% respectively, since the baseline of December 31, 2019. This surpasses their respective goals of 32%, 32% and 22% by 2025.

Between FY23 and FY24 alone, NYCERS' Scope 1 and 2 financed emissions intensity decreased by 24.16%, TRS' by 20.30% between June 30, 2023, and BERS' by 21.9%. During this same period, while there are no interim targets for a reduction in Scope 3 emissions due to limited data, NYCERS marked a decrease of 20.29%, TRS of 10.33% and BERS of 13.94%. All three boards aim to set Scope 3 interim emissions reductions targets next year once there are three years of portfolio data to base the targets on.

The divestment of fossil fuel reserve owners that was completed in 2022 and 2023 during Comptroller Lander's tenure was the largest driver of reductions in the portfolio's Scopes 1 and 2 financed emissions. Through a comprehensive analysis, the Comptroller's Bureau of Asset Management (BAM) has identified that the highest emitting sectors in the Systems' portfolio are materials, utilities, energy, and industrials, and is pursuing active engagement with portfolio companies in these sectors.

Reductions targets for Scopes 1 and 2 financed emissions are set at 59% by 2030 for NYCERS and TRS and 49% by 2030 for BERS. Each System has a goal of 100% by 2040.

INVEST in Climate Change Solutions

Investing in high-performing climate solutions are crucial for safeguarding the long-term value of their investment portfolios, the global economy, and the future of our planet as the risks of climate change become more apparent. In addition to individual emissions reductions targets, each System has set and far surpassed an interim target for investing in climate solutions consistent with its fiduciary duties and investment objectives.

NYCERS has a goal of investing a total of $17 billion in climate change solutions by 2035 and has $4.47 billion in invested and unfunded commitments in climate change solutions, exceeding the interim goal of $4 billion by 2025. This is also an increase of 26.4% over year FY23. A new interim target has been set at $8.7 billion in climate change solutions for 2030.

TRS has a goal of investing a total of $19 billion in climate change solutions by 2035 and has $5.9 billion in invested and unfunded commitments in climate change solutions, exceeding the interim goal of $4.2 billion by 2025. This is also an increase of 39.8% over year FY23.

BERS has a goal of investing a total of $1.8 billion in climate change solutions by 2035 and already has $608 million in invested and unfunded commitments in climate change solutions, exceeding the interim goal of $400 million by 2025. This is also an increase of 41.5% over year FY23.

ENGAGE for Alignment and Action

Engagement with the Systems' publicly traded portfolio companies, and the asset managers responsible for executing the investment directives of the Boards of Trustees of each of the three Systems, is integral to reaching net zero. BAM pursues the goal of decarbonizing the public markets portfolio of each System with the adoption of science-based targets in material sectors as a first step for creating a clear roadmap to decarbonization and engaging with the financial sector relative to the financing of fossil fuel projects and Scope 3 emissions.

On behalf of each of the Systems, the Comptroller's Office has participated in industry initiatives to develop frameworks and guidance for net zero alignment with asset managers across asset classes. Examples include NYCERS' membership in the Net Zero Asset Owner Alliance (NZAOA), participation in a working group of 8-10 limited partners jointly hosted by the Institutional Limited Partners Association (ILPA) and the Principles for Responsible Investment (PRI) to address approaches to climate in investment due diligence and monitoring, and continued leadership within Climate Action 100+ and other climate investor groups.

Corporate Engagement

During FY24, highlights of the Comptroller's Office's corporate engagement on behalf of the three Systems include:

• Historic agreements reached with JPMorgan, Citi, and the Royal Bank of Canada to disclose their ratio of clean energy financing to fossil fuel energy financing. JPMorgan became the first to publish these data in the latter half of 2024, and CEO Jamie Dimon described it as "an excellent example of what ongoing engagements and pragmatic and reasonable requests can accomplish."
• Shareholder proposals advanced to a vote at Bank of America, Goldman Sachs, and Morgan Stanley, where they garnered an average vote of 25.9%. This year, the Systems will refile at several banks for consideration by shareholders.
• Convening U.S. institutional investors and asset managers to develop expectations for corporate target-setting methodologies.
• Leadership within the Climate Action 100+ (CA100+). The Comptroller's Office serves as the thematic lead for science-based targets.

The Comptroller's Office believes that establishing science-based targets (SBTs) based on shared definitions and validated by an independent body, provide each System and other investors a critical accountability mechanism as they strive to reach net zero. The Office is actively engaging with the Systems' high-emitting portfolio companies concerning science-based targets. During FY24, Comptroller Lander sent direct letters to 58 portfolio companies in high-emitting sectors including Energy, Steel, Metals, Chemicals, Transportation and Shipping, and Aerospace, requesting third-party verified targets.

Asset Manager Engagement

The Comptroller's Office actively works with the Systems' individual asset managers to accelerate climate action in line with the goals adopted in the net zero plan, and have asked the Systems' asset managers to set net zero goals (including measurable interim, science-based targets), and actively incorporate climate risk questions into the due diligence process.

In addition to incorporating questions about each asset managers' net zero goal and climate action approach in the due diligence process, the Comptroller's Office distributed a letter setting expectations for each Systems' clear and ambitious net zero commitments and implementation plans to each of the Systems' managers accompanied by an annual ESG questionnaire for asset managers. Responses were received from managers representing 92% of each Systems' AUM and show that of the funds each of the Systems are invested in, 44% of NYCERS', 43% of TRS', and 48% of BERS' measure Scopes 1 and 2 emissions. Additionally, 28% of NYCERS', 28% of TRS', and 31% of BERS' have a net zero goal or plan to adopt one in the near future.

Although many of the Systems' managers are already assessing or planning to assess the impacts of climate change and related risks in their portfolio, the Comptroller's Office will focus on working directly with public markets managers to accelerate their climate action plans by the adopted deadline of June 30, 2025. NYCERS, TRS and BERS expect their public markets managers to submit net zero or alternative decarbonization plans by June 30, and they expect private markets managers that they invest in after that date to have such plans. TRS has set a deadline of June 30, 2026 for their private markets managers.

To read the full annual report for each System, please visit https://comptroller.nyc.gov/net-zero.

Related Links
Confronting the Climate Crisis
NYC Climate Dashboard (including emissions and climate solutions investments)
FY 2024 Annual Climate Reports

In addition to Comptroller Lander, the trustees of the aforementioned systems are as follows:

Teachers' Retirement System of the City of New York (TRS): Mayor Eric Adams' Appointee Bryan Berge, Director, Mayor's Office of Pension and Investments; Greg Faulkner, Chair, New York City Public Schools' Panel for Educational Policy; and Thomas Brown (Chair), Victoria Lee, and Christina McGrath, all of the United Federation of Teachers.

New York City Employees' Retirement System (NYCERS): Mayor Eric Adams' Appointee Bryan Berge, Director, Mayor's Office of Pension and Investments; New York City Public Advocate Jumaane Williams; Borough Presidents: Antonio Reynoso (Brooklyn), Vanessa L. Gibson (Bronx), Mark Levine (Manhattan), Donovan Richards Jr. (Queens), Vito Fossella (Staten Island), and; Henry Garrido, Executive Director, District Council 37, AFSCME; John Chiarello, President, Transport Workers Union Local 100; and Gregory Floyd, President, International Brotherhood of Teamsters, Local 237.

Board of Education Retirement System of the City of New York (BERS): New York City Public Schools Chancellor Melissa Aviles-Ramos, Represented by Karine Apollon; Mayoral appointees Marjorie Dienstag, Amy Fair, Gregory Faulkner, Anita Garcia, Anthony Giordano, Dr. Angela Green, Alice Ho, Jessamyn Lee, Sharon Odwin, Alan Ong, Phoebe Sade-Arnold, Maisha Sapp, Manny Tavarez; CEC appointees Adriana Alecia, Naveed Hasan, Jessamyn Lee, Thomas C. Sheppard, Venus Sze-Tsang; Borough President Appointees Camille Casaretti (Brooklyn); Rima Izquierdo (Bronx); Marielle Aliz (Manhattan); Shirley Aubin (Queens); Aaron Bogad (Staten Island); and employee members John Maderich of the IUOE Local 891 and Donald Nesbit of District Council 37, Local 372.

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