The New York State Common Retirement Fund (Fund) will invest $2 billion in an index focused on reducing the risks of climate change and capitalizing on the opportunities arising from the transition to a low-carbon economy, State Comptroller Thomas P. DiNapoli, trustee of the fund, announced today. This is part of the Comptroller's Climate Action Plan announced in 2019 and his goal for the Fund of net-zero greenhouse gas emissions by 2040.
The Fund will allocate $2 billion within its internally managed public equity portfolio to FTSE Russell's Russell 1000 TPI Climate Transition Index (CTI) in connection with the Fund’s Sustainable Investment & Climate Solutions (SICS) program.
“The New York State Common Retirement Fund has been recognized for leading the way with its comprehensive approach to addressing the enormous challenges posed by climate change, as well as investing in the tremendous opportunities created by global efforts to address this crisis,” DiNapoli said. “By using the Climate Transition Index, the Fund will have an investment tool that incorporates a robust data-driven approach to invest in corporations that are ensuring their businesses are ready for the low-carbon transition and stand to perform well in the years ahead.”
This new allocation to the CTI, which aligns with the Fund’s net zero commitment, uses five key criteria to evaluate corporate efforts to transition to the emerging net-zero economy. The CTI examines companies’ fossil fuel reserves, carbon emissions, green revenues, management quality and carbon performance, which will be used to overweight, underweight or exclude businesses based on their transition readiness.
FTSE Russell is one of the largest index providers in the world and its products have been used by institutional investors globally for decades.
“For more than 7 years, FTSE Russell has strived to be a trusted advisor to the Fund, helping Comptroller DiNapoli deliver on his goals to meet the retirement needs of state and local government employees, retirees, and their beneficiaries,” said FTSE Russell CEO Arne Staal. “FTSE Russell is extremely pleased to be partnering with the Fund on its journey to Net Zero by 2040. Our history as a provider of ESG index solutions dates back 20 years and with innovations like the Russell 1000 TPI Climate Transition Index, we are proud to work with investors to address their climate and sustainability objectives.”
Earlier this year, DiNapoli announced $800 million in three new investments through the SICS program to which he committed $20 billion. To date, the Fund has allocated $15.3 billion of that overall commitment. This is the third passive domestic investment under the program.
Background on DiNapoli’s Climate Investment Actions
In 2019, DiNapoli released a Climate Action Plan, a multi-faceted strategy to invest in sustainable companies, pursue climate solution investments, and apply minimum standards to portfolio companies to inform engagements, investments and potential divestment decisions.
Building on the Climate Action Plan’s comprehensive framework for addressing climate risk, in December 2020, DiNapoli announced the Fund’s goal to transition its portfolio to net zero greenhouse gas emissions by 2040. The Fund’s goal will be achieved through a combination of sustainable investments such as the CTI, engagements with portfolio companies and managers, public policy advocacy and, in certain instances, divestments. The Fund’s primary metric for assessing progress toward the net zero goal will be the percentage of public equity and corporate bonds that are aligned with a 1.5-degree scenario. A baseline assessment will be conducted, which will be used to determine the Fund’s progress toward its interim goal of 50% alignment by 2030. In addition, the Fund is setting other interim engagement and investment goals for 2030 that include actively engaging with 50% of the Fund’s publicly traded assets in high-impact sectors on net-zero by 2040 and ensuring that at least 75% of the $20 billion committed to SICS is invested in climate solutions.
Background on The 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 approximately $254.8 billion as of March 31, 2021. 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.