New York warning to asset managers highlights green retirement risks

Glad to see you again. Yesterday Earth Day was anxious for many with us non -profit green, in the midst of rumors that Donald Trump planned to celebrate with an executive decree demolishing their tax exemption status. The day came and came without this hammer blow.

Maybe Trump thought about the idea. Perhaps he was concerned about the work of his unfortunate defense secretary, or his dangerous stand-off with the governor of the federal reserve. Who knows – but climatic groups would be reckless to relax.

In New York, activists The statue of Taurus charged with Wall Street Defeat with green paint (then cleansed usefully). And the City Controller Brad Lander – who highlighted his solidarity with climate non -profit organizations – sent a message to asset managers who will have paid alarm ringtses, as I explain below.

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Sustainable investment

Shot Green Warning from New York Funds for asset managers

Blackrock, the largest asset manager in the world, has taken its share of brickbats through the political spectrum in the past two years. But the one launched yesterday by New York Brad Lander controller looked more worrying than most.

Some asset managers took climate change seriously “but took great steps back,” said Lander, citing the withdrawal of BlackRock from green investors alliances as an example. “We certainly let them know how dissatisfied we were,” he added.

The criticism came while Lander, who oversees New York's huge pension funds, has issued a warning to the asset management companies that invest money on their behalf: comply with the climatic objectives of the funds or be ready to lose their business.

Three of the five main funds, with investments of 235 billion dollars between them, have undertaken to reduce their carbon emissions funded to Net Zero by 2040. Funds have asked all their external asset managers who invest in public procurement to subject a detailed account of their own zero net plans by the end of June. For those who do not submit such a plan – or submit one who does not appear – Lander will advise the retirement councils to put their contract for a new competitive offer.

This seems to be part of an emerging trend, as I pointed out last month. Some of the largest managers of American assets have calmed down on climatic issues, after being examined with heavy exams for a supposed “waking capitalism” of the Republican legislators, while some conservative state officials have withdrawn from business. But now, they are threatened by the loss of contracts with pension funds who want their asset managers to adopt a proactive approach to climate problems.

In particular, the United Kingdom's popular pension fund in February withdrawn an investment mandate of 28 billion pounds Sterling ($ 37 billion) from State Street, after examining its sustainable investment policy. During the same month, a group of pension funds mainly in the United Kingdom and other institutions controlling 1.5 tn of dollars in assets warned that they could withdraw their business from asset managers who did not engage with climate risk companies.

Lander's warning emphasizes yesterday that this risk is not limited to Europe. For asset managers whose climatic plans do not exceed, the loss of affairs of these New York pension funds will prove to be painful. Blackrock alone manages $ 16.8 billion for one of the funds. New York public pensions are the largest in the United States outside of California (and although the giant funds of Golden State Calpers and Callstrs have not yet given their asset managers an explicit warning like that of Lander, they continue to emphasize the importance they attach to climate concerns).

Arbitrator said that the climatic plans of managers should comply with the following standards:

1. High up portfolio companies to stimulate the decarbonization of the real economy, not just the decarbonization of the portfolio.

2. Incorporate the risks and opportunities related to material climate change in investment decision -making.

3. Ensure a robust and systematic stewardship strategy which addresses the prioritization and climbing of engagement and voting to advance decarbonization.

Asset managers should define climatic expectations for all their portfolio companies, which must be invited to write zero net goals and transition plans.

The largely written requests from Lander have left his team a lot of discretion to decide whether the asset managers comply with the new rules. If he puts pressure on radical changes, criticisms probably alleviate the political greatness of Lander, who presents himself to become mayor of New York during this year elections. And all recommendations should still be approved by the boards of directors of funds.

Lander is right, however, to argue that “climate risk is a financial risk” – in particular for the retirement funds of several billion dollars, with his duty to consider the interests of beneficiaries in the decades in the future.

All these beneficiaries will not be as eager for climate action as New York teachers (in particular, pension funds for the city's police and fire services have not adopted zero net goals). But while pension funds continue to combat long -term risks of climate change and the energy transition, their asset managers should prepare for many other difficult conversations to come.

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