New York City Pension Funds Double Down on Decarbonization – New Expectations Will Impact Managers and Their Portfolio Companies

Over the last few months, most of the attention in the climate space in the U.S. has been on the dramatic, and expected, shift in federal government policy. However, some “blue state” officials continue to seek to advance decarbonization agendas. In this post, we discuss recently announced expectations by the New York City Comptroller that will impact asset managers, as well as the companies in which they invest. 

Among other roles, the Comptroller serves as a fiduciary to New York City’s public pension funds, which totaled approximately $279 billion in assets as of March. This gives the Comptroller significant input in manager practices.

On April 22, New York City Comptroller (and mayoral candidate) Brad Lander announced that the Teachers’ Retirement System (TRS), New York City Employees’ Retirement System (NYCERS) and Board of Education Retirement System (BERS) have instructed their public markets asset managers to submit a written plan describing their net zero plans, by June 30. In the written plans, the managers are expected to adopt the following practices at a minimum:

• Engage portfolio companies to drive real economy decarbonization, not just portfolio decarbonization. 
• Incorporate material climate change-related risks and opportunities in investment decision-making.
• Ensure a robust and systematic stewardship strategy that addresses prioritization and escalation of engagement and voting to advance decarbonization.

In addition, the Comptroller’s Office has indicated that the NYC Systems expect their asset managers to set expectations for all portfolio companies to, at a minimum:

• Measure and report scope 1 and 2 and material scope 3 emissions.
• Set clear goals to reach net zero by decreasing their scope 1, 2 and 3 emissions using one or more quantified climate measurement standards, such as those of the Science-Based Targets initiative.
• Adopt a clear transition plan to achieve net zero, detailing how the portfolio company will meet its short-, medium- and long-term climate goals. 
• Align future capital expenditures and lobbying with climate goals and targets.
• Consider the impacts on workers and communities from transitioning to a lower-carbon business model.

Managers’ plans are required to be submitted to the Comptroller’s Bureau of Asset Management, which will then “conduct a rigorous review of the plans to ensure that they are real and actionable.” Comptroller Lander has indicated that, if a manager refuses to submit plans, or it submit plans that do not meet the Office of the Comptroller’s standard, it will recommend that the TRS, NYCERS and BERS boards put the investment strategy out to bid. For many managers, these expectations will be difficult to navigate in light of “red state” public pension fund expectations and requirements (see Ropes & Gray’s Navigating State Regulation of ESG website). As part of any new bidding process, the Comptroller’s Office will recommend evaluating managers’ corporate-level climate behavior and stewardship practices as part of its due diligence. 

The Comptroller’s Office has had a longstanding focus on decarbonization. Earlier in the month, the office announced that from 2019 through 2024 there had been a 37% weighted average reduction in scope 1 and 2 emissions for the Systems in their public equity and corporate bond portfolios. This exceeded the 2025 interim targets adopted by each System as part of its Net Zero Implementation Plan. Reduction targets for scope 1 and 2 financed emissions are 59% by 2030 for NYCERS and TRS and 49% by 2030 for BERS. Each System has a goal of 100% by 2040.

The Comptroller’s climate change focus is not limited to New York City’s pension fund assets. In another announcement, a day earlier on April 21, the Comptroller’s Office released updates to its NYC Climate Dashboard. These updates included the addition of a climate and economic justice mapping tool that the Trump Administration had removed from federal websites. The NYC Climate Dashboard tracks the City’s progress in meeting its climate goals and assesses neighborhood preparedness for the impacts of climate change. The dashboard includes climate indicators relating to energy usage, emissions, climate finance, environmental quality and resiliency, along with data on city policies and programs designed to improve outcomes in these areas.

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