State Comptroller Thomas P. DiNapoli today released the report from the Decarbonization Advisory Panel. The report examines the financial impacts of climate change on the New York State Common Retirement Fund (Fund) and recommends ways for the Fund to build on its climate change work to protect and add value for the public workers that rely on it for retirement.
The six-member Decarbonization Advisory Panel, the first of its kind for a public pension fund, was formed by Gov. Andrew Cuomo and DiNapoli in 2018 and members were appointed in March 2018. It is comprised of investment, financial, environmental, energy and legal experts that served voluntarily. The panel was charged with offering strategies for the Comptroller’s consideration on how the Fund might identify, assess and manage the investment risks and opportunities of climate change. In the report released today, the panel offered a series of recommendations to further decarbonize the Fund and capitalize on a low-carbon economy.
“Climate change is a serious threat to financial markets and the global economy. The transition to a low-carbon economy and the physical impacts of climate change are well underway, and New York must do more to be ready,” DiNapoli said. “The New York State Common Retirement Fund is already a leader among public pension funds in analyzing our investments’ exposure to climate risk, but we need to engage in more strategies to protect the long-term value of the Fund. The Decarbonization Panel has offered ambitious recommendations and I have directed my staff to develop a climate action plan as a follow up to this report. I thank the committee members for lending their expertise during this year-long process and thank Governor Cuomo for his historic efforts to make New York a leader on many fronts when it comes to tackling climate change and protecting the environment.”
Joy-Therése Williams, chair of the Decarbonization Advisory Panel and senior advisor at Mantle314, said “The advisory panel put forth a bold and visionary strategy that will provide the New York State Common Retirement Fund with a foundation for the future and allow it to seize opportunities. Our panel of distinguished experts aimed high with our recommendations because we believe that urgent action is necessary to address climate-related risks and opportunities. Adapting a portfolio as large as the New York State Common Retirement Fund to a 2-degree or lower future by 2030 will be challenging but it can be done over time with additional resources and thoughtful planning. I want to recognize Governor Cuomo and Comptroller DiNapoli for their leadership and commitment to addressing climate change.”
The panel’s primary recommendation is for the Fund to transition its investments to 100 percent sustainable assets by 2030. Sustainable assets are investments, of any type, that are consistent with a 2-degree or lower future. The panel suggests that this would be accomplished by ramping up investment in sustainable assets and climate solutions, and establishing minimum standards to prioritize engagement and possible divestment.
- The Fund should establish a new climate solutions investment program and increase its funding of investments with a proactive approach to climate risk and opportunity;
- The Fund should establish minimum standards to measure the readiness of its investments for climate change impacts and the transition to a low-carbon economy. These standards may vary by asset class, sector of the economy or geography, but could be used to construct indices, evaluate managers, direct engagement and define exclusion from the Fund’s portfolio;
- The panel did not recommend the Fund divest specific stocks, but said that setting minimum standards could guide decisions on what securities to sell and help avoid investment managers whose operations and strategies are not sustainable.
The panel also recognized that the actions they proposed would take time, additional resources and aligned market compensation to implement and encouraged the Fund start work on a plan with urgency. It acknowledged that implementation would have to be phased in, staff added and that criteria would evolve over time, but offered flexibility in the recommendations for short-term actions and longer-term ambitions given the urgency of the issue.
Members of the advisory panel included (full biographies available in panel report):
- Joy-Therése Williams: Williams is a senior advisor at Mantle314, a Toronto-based climate advisory firm. She was the in-house climate change subject matter expert at the Ontario Teachers' Pension Plan, one of the world’s largest institutional investors. She is a Professional Engineer of Ontario and a Chartered Alternative Investment Analyst (CAIA).
- Cary Krosinsky: Krosinsky teaches sustainable investing at Brown, the Yale School of Management and New York University. He also serves on the faculty advisory committee on Energy Studies at Yale College. He is an author, co-founder and director of Real Impact Tracker, the Carbon Tracker Initiative and its parent Investor Watch, as well as principal at NPV Associates and sustainability advisor to DeepGreen.
- Bevis Longstreth: Longstreth is a retired partner of the international law firm of Debevoise & Plimpton. He was twice appointed by President Ronald Reagan to serve as a commissioner on the United States Securities and Exchange Commission and served on numerous boards. He is an author and adjunct professor.
- Alicia Seiger: Seiger is a lecturer at Stanford Law School and managing director of both the Stanford Sustainable Finance Initiative and the Steyer-Taylor Center for Energy Policy and Finance. She serves on the board of Ceres and Prime.
- George Serafeim: Serafeim is an author and professor of business administration at Harvard Business School. He has served on the board of directors of the High Meadows Institute, the working group of the Coalition for Inclusive Capitalism, and the Standards Council of the Sustainability Accounting Standards Board. He is a co-founder of KKS Advisors. He serves on the steering committee of the Athens Stock Exchange and as the chairman of Greece's Corporate Governance Council.
- Tim Smith: Smith is the director of ESG Shareowner Engagement at Walden Asset Management. He leads Walden’s ongoing shareholder engagement program to promote greater corporate leadership on environmental, social and governance issues.
Read the report, or go to: https://www.osc.state.ny.us/reports/decarbonization-advisory-panel-report.pdf
New York State Common Retirement Fund
The New York State Common Retirement Fund is the third largest public pension fund in the United States with assets of $207.4 billion as of March 31, 2018. The Fund holds and invests the assets of the New York State and Local Retirement System on behalf of more than one million state and local government employees and retirees and their beneficiaries. It has consistently been ranked as one of the best managed and best funded plans in the nation. It was recognized as the top U.S. investor, and third globally, for its efforts to combat climate change by the Asset Owners Disclosure Project. The Fund's fiscal year ends March 31. Learn more about sustainable investing at https://osc.state.ny.us/common-retirement-fund/sustainable-investments-and-climate-solutions-program.