The New York State Common Retirement Fund’s Corporate Governance Program supports and facilitates the integration of environmental, social and governance (ESG) into the Fund’s investments process.
New York State Common Retirement Fund’s ESG Investment Philosophy
We consider environmental, social and governance factors in our investment process because they can influence both risks and returns.
By promoting sound ESG practices at its portfolio companies and investment managers, the Program works to enhance and protect the Fund’s long-term value for the 1.1 million members, retirees and beneficiaries of the New York State and Local Retirement System who rely on it for retirement security.
Comptroller DiNapoli uses his voice as a major investor to improve corporate policies and practices, consistent with his fiduciary duty, at the Fund’s portfolio companies by:
- Direct communication with corporations through letters and meetings;
- Shareholder proposals asking corporate boards to address specific issues; and
- Votes on board directors and shareholder proposals at companies’ annual investors meetings.
The Comptroller’s Program also evaluates the ESG policies and practices of the Fund’s investment managers’ to assess the full scope of investment risks and opportunities. When it comes to ESG issues, the Fund focuses on three key issues:
- Taking Action on Climate Change
Comptroller DiNapoli has long believed environmental issues, including climate risks and opportunities, natural resource and raw material usage, and pollution and waste management, can impact the long-term value of the Fund’s investments.
Comptroller DiNapoli's Climate Action Plan promotes sustainable corporate practices in response to short- and long-term environmental issues. The Comptroller has also set 2040 as the Fund’s net zero carbon emissions target. Because of his efforts, the Asset Owners Disclosure Project (AODP) has ranked the Fund as third in the world and first in the U.S. among public funds in addressing climate-change-related investment risks and opportunities.
To learn more about the Comptroller’s efforts to address climate risk and invest in climate solutions, see Leading the Way on Climate Investment.
- Promoting Diversity and Protecting Workers
Diversity, Equity and Inclusion
The Fund has long regarded diversity as a critical measure of sound corporate governance, as research has shown that the ability to draw on a wide range of perspectives and experiences is a vital component of a company’s sustained success in the global marketplace. Additionally, companies that ensure diverse talent and strengthen equity and inclusion in their workforce increase their likelihood of performing well financially. Comptroller DiNapoli actively advocates for diversity, inclusion and non-discrimination in the boardroom and workplace by taking actions that include:Seeking voluntary disclosure of corporations’ federally-mandated reports on workforce and executive makeup, including data on compensation, ethnicity and gender. Recommending independent audits of companies’ efforts to promote civil rights, racial equity, inclusion and diversity in their workplaces. Aligning executives’ performance-based compensation with their company’s success in upholding ESG considerations, including the rights and well-being of the company’s workforce.
Human Capital and Labor Management
The Fund believes that the ability to establish and maintain constructive relationships with workers and the communities in which they operate is a hallmark of a company with a sound, sustainable and profitable long-term strategy. Because a company’s workforce is one of their most important assets, the Comptroller regularly encourages portfolio companies to implement robust human capital practices that allow them to recruit, retain, and promote high quality talent. Additionally, the Comptroller encourages companies to adopt strong worker protections, including health and safety, and respect for labor rights.
- Urging public companies in the Fund’s portfolio to formally consider diversity of sex, race, ethnicity, sexual orientation and gender identity when selecting board director candidates.
- Voting against incumbent board directors at companies that have no racially or ethnically diverse directors or women on their board.
- Encouraging board directors to amend corporate equal employment opportunity policies to include explicit bans on discrimination based on sexual orientation and gender identity.
- Pressing companies to report on their commitments to including people with disabilities across their workforces. Companies need strong policies to ensure their workforces are inclusive of people with disabilities or they risk missing out on an enormous pool of talented employees.
- Demanding Corporate Accountability
The Fund has long supported robust governance practices at its portfolio companies that promote well-run companies with clear accountability structures. Additionally, the Fund expects all companies to fully disclose their risks, risk oversight practices, board governance structures and procedures, and corporate and capital allocation strategies.
Executive compensation should be transparent and tightly tied to long-term performance. When a corporate board’s compensation committee fails to set responsible executive compensation, it signals inadequate management oversight.
Political Spending and Lobbying Disclosure
Since the U.S. Supreme Court’s 2010 Citizens United ruling, Comptroller DiNapoli has prioritized seeking disclosure of corporate spending on politics and lobbying. Shareholders need these disclosures to determine if investment dollars are being spent in the company’s best interest, or if that spending opens it to legal, reputational, and business risks.
The New York State Common Retirement Fund votes by proxy on each proposal at annual meetings and special meetings of U.S. portfolio companies, as well as selected international companies. Voting the Fund’s proxies at shareholder meetings is part of the Comptroller’s fiduciary responsibility, and an effective means of engaging and communicating with boards of directors and management about the Fund’s ESG priorities.
The Fund makes all proxy voting decisions independently, consistent with its Environmental, Social & Governance Principles and Proxy Voting Guidelines.
During the 2020 Proxy Season (calendar year 2020), the Fund cast 28,727 votes on ballot items at 3,219 company meetings.
View Proxy Votes
Proxy Voting at a Glance
The Comptroller’s Program also evaluates the ESG policies and practices of the Fund’s investment managers to assess their approach and commitment to ESG. As part of the due diligence process, the Fund completes an ESG scorecard for every proposed investment.
Corporate Governance Reports
- NYSCRF Environmental, Social & Governance (ESG) Strategy
- 2019 Corporate Governance Stewardship Report
- 2018 Corporate Governance Stewardship Report
- 2017 Corporate Governance Stewardship Report
To contact the Fund's Corporate Governance Program, email [email protected].