The pension system began looking at the financial impact of fossil fuel investments in March 2019 when members of the board’s investment committee met with a Goldman Sachs head of research on how companies energy companies can adapt to climate change and with leaders of the S&P Dow Jones indices on low-carbon investments. strategies, according to a schedule presented by the council to the state legislature.
Intensive efforts began in September 2020 when members of the investment committee met with environmentalists about fossil fuel divestment, as well as a BlackRock Inc. executive about sustainable investing.
After that, members of the board and/or its investment advisory committee met almost monthly on the subject with representatives from companies including Mercer, its ESG consultant; Reed Smith LLP, its trustee advisor; Callan LLC, its general investment consultant; and some of its asset managers.
Among the topics discussed: divestment from fossil fuels; proxy voting guidelines; ESG investment process; the geopolitics of the energy transition; climate risk assessments; integrating climate data into the investment process; and disclosure of sustainable investing.
Staff members also consulted with state legislators that have introduced fossil fuel divestment bills, and they discussed ESG investing with organizations such as climate advocacy group Ceres, whose system retirement is a member.
They also discussed issues with officials from the $267.8 billion New York State Common Retirement Fund, Albany, and New York City’s retirement systems, from worth $270.7 billion, which have already launched policies of divestment and engagement in fossil fuels.
A few months before the Dec. 28 announcement, the pension system held a virtual meeting with officials from the New York Department of Financial Services, including Nina Chen, director of sustainability and climate initiatives, Mr. Lee. The department audits NYSTRS every five years, with the final audit expected to begin this month. Climate change is a new feature of the exam.
They discussed the department’s role “in supporting pension plans in assessing financial risks related to climate change and how best to integrate such risk assessment into the governance structure, business strategies and risk management framework” for pension plans, Lee said of the Sept. 8 meeting. “System staff also discussed the climate action plan being considered by the board.”
On December 20, eight days before the pension system unveiled its ESG strategy, several environmental groups filed a complaint with the Department of Financial Services accusing the system of failing to manage climate risk, adding that it “could be in violation” of public insurance. regulations and a state retirement law. The groups called on the department in its audit to ensure the pension system develops and implements “a comprehensive and transparent plan to prudently divest from fossil fuels.”
Mr. Lee, who said he was surprised by the complaint, noted that the ministry did not allow the pension system to release its official response. “We welcome all recommendations” from the ministry, he said.