Funds call for the complaint to be dismissed because the complaint’s arguments against the divestment decision are factually and legally baseless
Plaintiffs admit the divestment decision has no impact on the guaranteed retirement benefits they will receive many years from now
Three of New York City’s pension funds filed a motion to dismiss a baseless lawsuit challenging their decision to stop investing in publicly-traded securities of fossil fuel reserve owners. The lawsuit, filed in May, was brought by four public employees who are future pension beneficiaries (out of more than 630,000 current and future beneficiaries), along with an Oklahoma anti-union advocacy group. The lawsuit, Wong et al v. NYCERS, claimed that the three Systems (Teachers’ Retirement System, New York City Employees’ Retirement System, and Board of Education Retirement System) breached their fiduciary duties in the years-long process of divesting from fossil fuel companies.
“The arguments in this lawsuit are a weak attempt by anti-ESG, anti-union forces to undermine the decisions by our pension system trustees to assess the very real risks of climate change to their portfolios,” said New York City Comptroller Brad Lander. “The Systems are implementing ambitious and well-researched plans to address the responsibility that investment managers and portfolio companies have to assess the material risks of climate change. Rather than advancing the actual interests of our City’s public employees and retirees, the lawsuit seeks to protect companies that continue to focus on fossil fuels despite the ongoing and necessary transition to a low carbon economy. The courts should call this lawsuit what it is and dismiss it with prejudice.”
The motion seeks dismissal because the plaintiffs, facing no injury because the decision will have no impact on their retirement benefits, lack standing and cannot come close to articulating a claim for breach of fiduciary duty. The motion also notes that well-settled legal precedent forbids courts from second-guessing the discretionary investment decisions of the Systems’ publicly accountable trustees, who are legally responsible for administering the funds.
Throughout the lawsuit, the plaintiffs attempt to make three meritless arguments against divestment. They falsely claim that the Plans divested without financial analysis. They pretend that climate-related risks are wholly “unrelated” to financial considerations. And they ignore that, over the last decade, fossil-fuel stocks performed substantially worse than the market as a whole,
In 2021, recognizing the threat climate-change related risks pose to their portfolios, the three Systems voted to divest from publicly traded fossil fuel reserve owners. This followed a deliberative and extensive fiduciary process which assessed portfolio exposure to fossil fuel stranded asset risk, industry decline and other financial risks stemming from climate change. Even the fossil fuel industry has admitted that climate-change related risks are material financial risks. In SEC filings, they acknowledge the potential impact to long-term financial performance and profitability.
Market performance further supports the Systems’ decisions to stop investing in fossil fuel companies. In the five-year period preceding the Systems’ decisions, energy stocks lost more than 35% of their value, while the broader stock market increased in value by more than 50%. Through early August 2023, energy stocks have lost 1.3% in 2023, while the broader stock market has gained 17.2%.
Despite the charges in the suit, each plaintiff admits that the decision will have no impact on their future retirement benefits, which remain the same regardless of the Systems’ particular investment decisions. This means that the plaintiffs face no injury and lack standing to sue. This lawsuit is an unfortunate case of displeased but uninjured fund members appealing to the courts regarding investment decisions that they do not agree with.
The New York City Law Department and Groom Law Group represent the three Systems in litigation.
In addition to Comptroller Lander, the trustees of the three New York City pension funds 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), 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 Chantel Cabrera, Lilly Chan, Marjorie Dienstag, Khari Edwards. Gregory Faulkner, Anita Garcia, Anthony Giordano, Dr. Angela Green, Ruth Maria Kenley, Michelle Joseph, Alan Ong, Phoebe Sade-Arnold, Maisha Sapp, 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.
