Building on their ambitious climate action and net zero efforts, three of the City’s pension funds have filed shareholder proposals for some of the largest banks to fully report their ratios of clean energy to fossil fuel finance, an essential part of their climate transition commitments
New York City Comptroller Brad Lander and trustees of the New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System (TRS), and Board of Education Retirement System (BERS) (the “Systems”) announced the filing of shareholder proposals requiring banks to live up to their own rhetoric on achieving net zero implementation plans by fully reporting their ratios of clean energy to fossil fuel finance. The three Systems filed the proposals at JPMorgan Chase and Morgan Stanley, and NYCERS and TRS also filed the banks at Bank of America, Citigroup, Goldman Sachs, JPMorgan Chase, Morgan Stanley and Royal Bank of Canada.
“Despite all their talk, the big banks have made little progress in the energy finance transition over the past couple of years,” said Comptroller Lander. “As long-term investors exposed to climate risk, we can’t just take their word for it. Reporting transparently on their ratios of clean energy to fossil fuel finance is key to seeing whether or not they are living up to their net-zero commitments. Right now, they aren’t – and that must change. Our planet, our economy, and our investment portfolios are all at stake.”
The resolutions call on each of the banks to disclose energy-supply financing ratios and to report regularly and transparently on whether or not they are hitting those targets. Energy-supply finance ratios are an essential metric for fully measuring a bank’s equity and debt financing of both companies and projects.
Analysis by Bloomberg New Energy Finance shows that, based on the latest climate models, overall energy sector investment needs to reach a minimum ratio of 4:1 by 2030. In 2022, North American banks fell far short of this target with an average ratio of 0.6:1. Those ratios were slightly worse than 2021, revealing that despite all their talk, banks are making little progress on climate finance transition. Additionally, North American banks’ energy-supply finance ratios are generally far behind their European counterparts.
The proposals build on the three Systems’ bold climate action outlined in their net-zero implementation plans, which includes the strategy of engaging with portfolio companies, including those in the finance sector, to reduce the Systems’ financed emissions. The Comptroller’s Office is currently in dialogue with each of the banks, in hopes that they will agree to adopt and transparently report on their energy supply financing ratios rather than forcing votes on shareholder resolutions.
As long-term shareholders, the three Systems are concerned with the consistent funding of fossil fuel projects and lack of transparency from these banks on their progress toward reaching their stated climate goals and commitments. Disclosure is critical as investors seek to measure each bank’s progress towards their net zero goals, because shareholders must be assured that banks are adequately factoring in long term climate risk into their financing.
Banks aligning their activities with their own climate goals are better prepared to manage the risks associated with the global energy transition, and can capitalize on profitable opportunities in clean energy and position themselves as leaders in a rapidly changing market. Annual disclosure of a clean energy supply financing ratio would complement existing disclosures from the banks and give investors a clearer picture of progress toward the banks’ own goals.
As warnings from global institutions such as the Intergovernmental Panel on Climate Change and International Energy Agency (IEA) become starker, there is clear momentum for the transition to a low-carbon economy. Banks are playing an important role by adopting net zero targets and committing to aligning with net zero and the Paris Climate Accords. Banks have set ambitious targets to increase their investment in sustainability and support low-carbon solutions, but their intentions regarding the essential transition away from fossil fuel finance remain ambiguous.
The International Energy Association’s 2021 report noted investment in clean energy was expected to reach a record $1.8 trillion in 2023. In 2022, banks reportedly earned more in lending and underwriting fees from clean energy projects than from oil, gas, and coal companies. Despite the progress, the IEA notes that investments in clean energy need to triple by the end of the decade.
In addition, the IEA makes clear that the continued financing and underwriting of fossil fuel supply projects is incompatible with a Paris-aligned pathway to net zero. Reaching net zero while meeting critical energy needs will require both rapidly scaling up renewable energy projects and phasing out fossil fuels.
“North American banks appear to believe that they can just scale up financing of clean energy, without phasing out fossil fuel finance,” Lander continued. “But press releases about great new projects won’t protect our portfolios or our planet if overall emissions keep rising.”
In addition, the proposals recommend each company:
- Set timebound energy-supply financing ratio targets aligned with its net zero commitment.
- Consult BloombergNEF Report when setting Ratio targets and defining “low carbon” and “fossil fuel” financing.
- Establish standardized industrywide methodologies.
- Include lending in its ratio if methodologically sound.
As of December 2023, the three New York City retirement systems combined have a total holding of:
- 2.81 million shares of JPMorgan Chase stock valued at $477.51 million.
- 1.36 million shares of Morgan Stanley stock valued at $126.81 million.
- 7.17 million shares of Bank of America stock valued at $241.31 million.
- 2.32 million shares of Citigroup stock valued at $119.46 million.
- 385.63 thousand shares of Goldman Sachs stock valued at $148.76 million.
- 216.12 thousand shares of Royal Bank of Canada stock valued at $21.96 million.
In addition to Comptroller Lander, the trustees of the aforementioned systems are as follows:
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: Mark Levine (Manhattan), Antonio Reynoso (Brooklyn), Donovan Richards Jr. (Queens), Vito Fossella (Staten Island), and Vanessa L. Gibson (Bronx); Henry Garrido, Executive Director, District Council 37, AFSCME; Richard Davis, President Transport Workers Union Local 100; and Gregory Floyd, President, International Brotherhood of Teamsters, Local 237.
Teachers’ Retirement System (TRS): Mayor Eric Adams’ Appointee Bryan Berge, Director, Mayor’s Office of Pension and Investments; Chancellor’s Representative, Dr. Angela Green, New York City Department of Education Panel for Educational Policy; and Thomas Brown (Chair), Victoria Lee, and David Kazansky, all of the United Federation of Teachers.
Board of Education Retirement System (BERS): Schools Chancellor David C. Banks, Represented by Karine Apollon; Mayoral appointees Lilly Chan, Marjorie Dienstag, Gregory Faulkner, Anita Garcia, Anthony Giordano, Dr. Angela Green, Alan Ong, Phoebe Sade-Arnold, Maisha Sapp, Venus Sze-Tsang, Gladys Ward; CEC appointees Naveed Hasan, Jessamyn Lee, Thomas Sheppard, and Ephraim Zakry; Borough President Appointees Geneal Chacon (Bronx); Tazin Azad (Brooklyn); Kaliris Salas-Ramirez (Manhattan); Sheree Gibson (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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