New York City’s pension funds are not being deterred by the investment industry’s retreat from climate initiatives and Republican pushback. Instead, the pension funds are forging ahead with efforts to decarbonize and the city’s comptroller, a mayoral candidate, has moved to sue Tesla for alleged securities fraud on the plans’ behalf.
The city’s public pension systems — which include New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System (TRS), and Board of Education Retirement System (BERS) — announced a 37 percent reduction in greenhouse gas emissions tied to their portfolios since 2019, exceeding interim climate targets one year ahead of schedule.
This announcement from NYC Comptroller Brad Lander is part of the city’s public commitment to achieving net zero greenhouse gas emissions in its funds by 2040. This initiative, kicked off in 2021, is the plans’ second annual decarbonization update. New York has divested from its publicly traded fossil fuel portfolio — the first major U.S. public pension to do so.
Lander told Institutional Investor the emissions decline, financed by the plans’ public equity and corporate bond investments, resulted from “engaging with companies to push for science-based decarbonization, scaling up our climate solutions, divesting from fossil fuels, and then disclosing our progress every year.”
Lander explained that decarbonizing the portfolios is essential to the pensions’ role as a fiduciary. “Climate risk is financial risk,” he said. “If we don’t move toward net zero on the Paris Accords’ timeline, we will burn up trillions of dollars, making it harder to meet our obligations to our beneficiaries.”
The War on Climate Investing
The systems reported a combined net return of 10 percent for the fiscal year ended June 30, 2024, above the actuarial target of 7 percent and in line with the median return for public DB plans as of December 31, according to Callan.
Environmental investing has become highly politicized. While Lander is an outspoken critic against both the anti-ESG movements and the big investment banks who retreated from climate initiatives, he’s not the only allocator pushing back. A growing number of fiduciaries and state leaders contend that these efforts prioritize short-term gains for fossil fuel companies over the long-term financial security of retirees and workers.
“The war being waged on climate investing by Republican treasurers, attorneys general, and governors is putting their retirees’ futures at risk as well,” he said. “They’re just doing it for the benefit of their fossil fuel donors. You can’t escape climate risk by ignoring or demonizing it.”
Driving Tesla to “Tell the Truth to Investors”
As part of Lander’s strategy to not just divest, but to hold companies accountable, Lander is also pushing to sue Tesla over misleading claims about its CEO Elon Musk’s involvement in the company, contending that the head of the White House’s DOGE initiative has spent little of his time managing the car company, and promoting policies that are actively harmful to its business.
“We’ve been investors in Tesla for years and consider it a climate investment,” Lander said, adding that “for Tesla to sell more EVs, it needs a full-time CEO, a board providing independent governance, and it needs to tell the truth to investors.”
In May, Lander’s office submitted a Notice of Exempt Solicitation on behalf of the city’s pensions, calling for Tesla shareholders to reject a proposed pay package for Musk. Tesla’s stock has plummeted nearly 40 percent in three months, wiping out over $300 million for NYC’s pension systems, which saw their 3 million shares drop from $1.26 billion to $831 million.
This move follows New York state senators including Patricia Fahy (D. Albany) urging the state’s comptroller Thomas DiNapoli to sell off the $273 billion New York State Common Retirement Fund’s $1.4 billion holdings in Tesla. While the state’s common retirement fund has announced plans to divest from oil and gas companies in the past, DiNapoli’s office has not yet made any reallocation commitments regarding Tesla.
Lander, a Democrat, is also running for NYC mayor amid a crowded pool of candidates. When asked if his net-zero investment strategy would shape his mayoral campaign, he pointed to the pensions’ financial and climate successes as proof of his leadership.
“Our success as investors — outperforming our peers while also setting and achieving ambitious climate goals — shows how I will be a good mayor. I’m proud of the track record I have in delivering for the taxpayers of NYC,” he said.
