The New York State Common Retirement Fund, valued at an estimated $226 billion (£169bn), has adopted a goal to transition its portfolio to net zero greenhouse gas emissions by 2040.
It will review its investments in energy sector companies within the next four years, with a view to divest from the “riskiest” fossil fuel companies that contribute to climate change by 2025.
Building on its 2019 Climate Action Plan, the Fund will continue to use its minimum standards for determining whether a company is “well-prepared” for the transition to a low carbon global economy and will sell its shares in companies that fail to take steps to mitigate climate risks.
It has already set minimum standards for the thermal coal mining industry and divested from 22 coal companies and is currently wrapping up its evaluation of nine oil sands companies.
In addition, the Fund will develop minimum standards for investments in shale oil and gas, 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.
New York State Comptroller Thomas P. DiNapoli said: “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.
“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.”
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 set interim trajectory goals to measure progress towards its 2040 goal.
Senator Liz Krueger welcomed the “exciting, bold and responsible leadership position”, suggesting it sets a high bar in a vital year of climate action.
She added: “The New York State Common Retirement Fund is the third largest pension fund in the country and when it takes action, people pay attention.
“Rigorous and timely review, with divestment for climate laggards across the energy sector and a commitment to a net zero portfolio by 2040 will protect the Fund, current and future retirees and taxpayers from unacceptable levels of climate risk. It also sends a clear message that the era of dirty fossil fuels must and will come to an end and the smart money is getting out sooner rather than later. This announcement is a big deal and it is a win-win for the Fund’s bottom line and the future survival of our society.”