The New York State Common Retirement Fund, one of the largest pension funds in the US, with approximately $226 billion in assets, announced today a new goal to transition its portfolio to net zero greenhouse gas (GHG) emissions by 2040.
According to New York State Comptroller Thomas P. DiNapoli New York State Comptroller Thomas P. DiNapoli, the pension fund’s new goal will help ensure that the fund’s portfolio is adapting as the world increasingly moves toward net zero emissions targets by or before 2050. The fund will take an active role as part of its new commitment, including engaging with companies to encourage them to reach net zero carbon emissions more quickly, and voting against board directors at portfolio companies that fail to take steps to mitigate climate risks.
“New York State’s pension fund is at the leading edge of investors addressing climate risk, because investing for the low-carbon future is essential to protect the fund’s long-term value. Achieving net-zero carbon emissions by 2040 will put the Fund in a strong position for the future mapped out in the Paris Agreement.”
DiNapoli stated that the new commitment will include a review over the next four years of the fund’s energy sector investments, assessing companies’ transition readiness and climate-related investment risk. The Comptroller’s office stated that the fund is already wrapping up its evaluation of nine oil sands companies, and will develop minimum standards for investments in shale oil and gas, which will be followed by other sectors including integrated oil and gas, other oil and gas exploration and production, oil and gas equipment and services, and oil and gas storage and transportation. The fund will develop minimum standards for each sector, and determine which companies are suitable to remain in the portfolio by 2025.
According to the Comptroller, where consistent with fiduciary duty, the review could lead to divestment of companies that fail to meet minimum standards. The Fund has already set minimum standards for the thermal coal mining industry and divested from 22 coal companies.
“We continue to assess energy sector companies in our portfolio for their future ability to provide investment returns in light of the global consensus on climate change. Those that fail to meet our minimum standards may be removed from our portfolio. Divestment is a last resort, but it is an investment tool we can apply to companies that consistently put our investment’s long-term value at risk.”