NYC Comptroller Lander Proposes Excluding Future Private Markets Investments in Midstream and Downstream Fossil Fuel Infrastructure by the New York City Retirement Systems

 

If adopted by trustees, the policy would expand the funds’ divestment from fossil fuel reserve owners and exclusion of upstream fossil fuel investments in private markets to cover midstream and downstream infrastructure, such as pipelines and distribution terminals

New York City Comptroller Brad Lander announced support for a policy that would cease future investments by New York City public pension funds in midstream and downstream fossil fuel infrastructure. The proposal builds upon the leadership taken previously by Comptroller Lander and the trustees of the New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System (TRS), and Board of Education Retirement System (BERS) to decarbonize the funds’ holdings through strong action consistent with fiduciary duty to their beneficiaries.

The three pension funds previously divested from fossil fuel reserve owners in their public equities portfolio (passed by the boards in 2018, completed in 2022), and voted to exclude upstream fossil fuel investments (i.e. exploration and extraction) in their private markets investments in 2023. The policy Lander is proposing today would expand this exclusion to include a prohibition on future investments in midstream and downstream infrastructure (e.g. pipelines, LNG terminals) in their funds’ private equity and infrastructure portfolios.

“Climate risk is financial risk, and we have a fiduciary duty to our beneficiaries to take that risk seriously as we make long-term investment decisions,” said Comptroller Brad Lander. “The impacts of the climate crisis are playing out in real time, with more frequent hurricanes, flash floods, intense heat waves, and deteriorating air quality jeopardizing our planet and our portfolios. Excluding pipelines and LNG terminals from future investments will help mitigate the systemic risks that climate change poses to the global economy and to New York City’s public pension funds.”

These exclusions are part of the funds’ broader Net Zero Implementation Plans, adopted in 2023, which include annual disclosure of Scope 1, 2, and 3 emissions; strategic engagement with portfolio companies and asset managers to reduce real-world emissions; and significantly scaling up the funds’ investments in renewable energy and climate solutions. Under Comptroller Lander’s leadership, the funds have:

• Completed their divestment from publicly traded fossil fuel reserve owners, making them the first sizable U.S. public pension system that has divested from both its active and passive publicly traded fossil fuel portfolio.

• Established an exclusion policy in upstream fossil fuels in private markets.

• Led shareholder campaigns that persuaded JP Morgan Chase, Citibank, and Royal Bank of Canada to disclose the ratio of their green vs. fossil fuel financing, with the goal of making this a sector-wide standard that supports the energy transition on a Paris-aligned timeline.

• Led shareholder engagement with utilities (a leading source of Scope 1 and 2 emissions in our portfolio) to decrease their carbon footprint in line with the Paris Accords.

• Adopted an ambitious net-zero plan, which includes expectations that all of the funds’ public markets investment managers will have net-zero plans in place by 2025, and private market investment managers by 2026.

• Dramatically increased investments in renewable energy and climate solutions to over $11 billion.

• The New York City Employees’ Retirement System (NYCERS) has joined the Net-Zero Asset Owner Alliance (NZAOA), a broader investor alliance for aligned climate action.

Staff of the Comptroller’s Bureau of Asset Management will engage in research and development to craft the specific policy language and present it to the trustees of the three funds in early 2025, along with an assessment of its implications and impacts. Notwithstanding the funds’ prior divestment actions, overall investments in energy and climate solutions have grown to over $11 billion, nearly three times the volume of the funds’ holdings in fossil fuel reserve owners prior to 2021.