New York pension funds applaud SEC proposal on corporate climate disclosure

New York’s top financial stewards have welcomed the Securities and Exchange Commission’s proposed rule to require companies to disclose climate-related financial risks.

State Comptroller Thomas DiNapoli and City Comptroller Brad Lander welcomed the SEC’s proposal, saying environmental transparency is good for state and city pension plans.

“This proposed rule will provide shareholders with the decision-useful data needed to assess a company’s climate-related financial risk and encourage companies to assess the threats that climate change poses to their fiscal health and sustainability. “said New York Comptroller Brad Lander.

Donna Alberico

“The climate crisis poses a clear risk to our economy, our financial markets and our portfolios,” Lander said in a statement. “The Securities and Exchange Commission’s announcement is a big step forward in helping investors like New York City pension systems assess the financial risks posed to businesses by climate change.”

Action by the federal government, he said, was needed and long overdue.

“For too long, disclosure of climate risk information by publicly traded companies has been voluntary and without uniform standards,” Lander said. “As a result, investors lack the information needed to assess the financial risks to their portfolios or potential investments posed by physical climate impacts such as rising seas, floods and wildfires, as well as political impacts of companies. and governments adopted to reduce emissions and exposure to climate threats.

Lander is a trustee of the city’s five major pension funds, which are the New York City Employees Retirement System (NYCERS); the New York City Teachers’ Retirement System (TRS); the New York City Police Pension Fund; New York City Fire Department Pension Fund Subchapter Two; and the New York City Board of Education Retirement System (BERS).

As of January, the funds had $265.9 billion in assets under management and were the fourth largest public pension plan in the United States.

Three of the city’s five independent pension funds, NYCERS, BERS and TRS, are divesting from securities linked to fossil fuel companies. The police and fire service pension funds are not involved in the divestment action.

The city is one of the largest issuers of municipal bonds in the country. In the first quarter of fiscal 2022, it had about $38.13 billion in general bonds outstanding. This does not include various agencies such as the Transitional Finance Authority or the Municipal Water Finance Authority, which have $42 billion and $31 billion in debt respectively.

“As trustee of over 750,000 pension beneficiaries, I have a duty to consider and address the climate risks of our investments as well as the wider systemic risks that climate change creates for the global economy, as we strive to navigate the transition to a low carbon economy,” Lander said.

DiNapoli also welcomed the proposal, saying it would allow for better investment decisions.

The SEC’s decision “will provide investors with the robust climate insights we have long advocated for,” he said in a statement. “Access to consistent, comparable and reliable market information will significantly improve the ability of the state pension fund to assess and address risks and opportunities as we navigate our way to net zero by 2040. . »

DiNapoli is a trustee of the Joint State Pension Fund, which is the third largest in the country. As of September 30, 2021, the state pension fund had assets of approximately $267.8 billion and was 99.3% funded.

The fund has returned 33.5% over the past year. Due to the strong performance of the fund, employer contributions from state and local entities are reduced, which will save local governments about $1.5 billion in 2023, according to the state.

In 2019, DiNapoli released a plan for the pension fund to invest in sustainable businesses, continue investing in climate solutions and apply minimum standards to portfolio companies.

The fund has also divested from oil sands investments by companies that lack a climate action plan and continues to divest from coal producers.

“It is our responsibility as investors to ensure that the companies we invest in are prepared for the future, so that they can be profitable and successful in the global marketplace,” DiNapoli said. “To do this, we must have the information necessary to make informed investment decisions.”