New York City Comptroller Mark Levine announced that the City’s five public pension systems have launched a search for asset management firms to provide public equity passive indexing services, which make up the majority of the systems’ $127 billion in public equity investments.

The new bidding process follows a recommendation last year by former NYC Comptroller Brad Lander that the city’s pension funds drop a $42 billion investment mandate with BlackRock, as well as those with Fidelity and PanAgora, over the asset managers’ failure to submit decarbonization plans that were aligned with the pension system’s net zero investment goals.

Notably, however, the process keeps the door open for BlackRock to continue managing funds for the NYC pension system, if it is awarded a mandate in the new search.

New York City’s pension funds represent nearly $300 billion in assets – making them collectively one of the largest pubic pension systems in the U.S. – and include the New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System (TRS), and Board of Education Retirement System (BERS). The Comptroller is the investment advisor to and custodian of assets of the city’s pension funds.

In 2022, the NYC pension boards launched a Net Zero Implementation Plan, including a goal to achieve net zero emissions by 2040, and a requirement for asset manager to submit net zero plans in 2025.

The recommendation by former Comptroller Lander focused largely on the approach the asset managers have taken towards complying with the Trump administration’s new reporting requirements to the SEC, which he said had led BlackRock and Fidelity to take more restrictive approaches on engagement and proxy voting than other large asset managers.

Earlier this year, Levine’s office reported that asset managers BlackRock and Fidelity remain “insufficiently aligned” with their net zero expectations, while noting that Pangora has strengthened its approach to better align with expectations.

In a statement announcing the launch of the new search, Levine said:

“Fulfilling our mandate of delivering strong returns for our public sector workforce and retirees requires ongoing review of our contractual relationships with each of our asset managers. We cannot keep these relationships on autopilot.”

The pension systems’ last bid for public equity index services was in 2017, and existing contracts are set to expire by the end of 2026. The Comptroller’s office said that the system is looking for services to manage capitalization weighted indexes, smart beta/alternatively weighted indexes, or other types of indexed portfolio such as those based on ESG factors and limits on carbon.

In a letter issued last year following Lander’s recommendation, BlackRock called the Comptroller’s statements “another instance of the politicization of public pension funds, which undermines the retirement security of hardworking New Yorkers.”

In a statement provided to ESG Today following the launch of the new asset manager search process, a BlackRock spokesperson said:

“We are proud that New York City is a long-standing client, and we look forward to continuing our work with them so that New York’s police officers, firefighters, teachers and other public employees can have a secure retirement.”