December 9, 2020 - New York State Comptroller Thomas P. DiNapoli announced today that the New York State Common Retirement Fund (Fund), valued at an estimated $226 billion, has adopted a goal to transition its portfolio to net zero greenhouse gas emissions by 2040. This process will include completion within four years of a review of investments in energy sector companies, using minimum standards to assess transition readiness and climate-related investment risk, with, where consistent with fiduciary duty, divestment of companies that fail to meet minimum standards.
On the eve of the 5th anniversary of the Paris Agreement, as the world increasingly moves toward net zero emissions targets by or before 2050, this goal will continue to ensure the Fund's portfolio is adapting to the anticipated transition. This ambitious and multifaceted effort continues State Comptroller DiNapoli's leadership on management of climate risk to investments, for which the Fund is already top ranked in the United States by the Asset Owners Disclosure Project.
"New York State's pension fund is at the leading edge of investors addressing climate risk, because investing for the low-carbon future is essential to protect the fund's long-term value," State Comptroller DiNapoli said. "Achieving net-zero carbon emissions by 2040 will put the Fund in a strong position for the future mapped out in the Paris Agreement. We continue to assess energy sector companies in our portfolio for their future ability to provide investment returns in light of the global consensus on climate change. Those that fail to meet our minimum standards may be removed from our portfolio. Divestment is a last resort, but it is an investment tool we can apply to companies that consistently put our investment's long-term value at risk."
The Fund will continue its use of minimum standards for determining whether a company is well-prepared for the transition to a low-carbon global economy. The Fund has already set minimum standards for the thermal coal mining industry and divested from 22 coal companies. The Fund is currently wrapping up its evaluation of nine oil sands companies and will develop minimum standards for investments in shale oil and gas. Those will be followed by; integrated oil and gas; other oil and gas exploration and production; oil and gas equipment and services; and oil and gas storage and transportation. Minimum standards for all of these sectors, and a determination of which companies are suitable to remain in the Fund's portfolio, will be completed by 2025. After completing initial reviews, the Fund will continue to reassess whether the remaining companies are meeting minimum standards and are on viable low-carbon transition pathways.
As part of its net zero commitment, the Fund will continue to increase its engagement efforts with companies across industries to encourage them to reach net zero carbon emissions more quickly and will continue to vote against board directors at portfolio companies that fail to take steps to mitigate climate risks. The Fund is primarily a passive index investor in the public equity markets and its size gives it a prominent voice at companies across the globe. Major companies have already adopted net zero (or negative carbon) goals, including Microsoft (negative carbon by 2030), Apple (net zero by 2030), and Amazon (net zero by 2040), and more companies adopting these goals will further mitigate the risks of climate change on the Fund's portfolio.
The Fund will also establish interim trajectory goals to measure progress toward its 2040 net zero target and institute transparency measures regarding the Fund's progress, including annual progress reports, and updates at the outset and conclusion of each sector review.
The Fund's strategies — to address climate risk to investments by achieving net zero carbon emissions by 2040 and comprehensively reviewing companies, with divestment from those that fail to meet minimum standards where it's consistent with fiduciary duty — go further, faster, than the goals outlined in the Fossil Fuel Divestment Act, sponsored by Sen. Krueger and Assemblyman Ortiz. Therefore, the legislators have indicated that the Fossil Fuel Divestment Act will not be reintroduced in January 2021.
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