$200bn pension fund launches divestment RfP

New York City has taken its “next big step” towards ditching fossil fuels with the release of its much-anticipated Request for Proposals (RfP) for a divestment strategy.
The Office of New York City Comptroller Scott Stringer, which oversees the City’s $200bn public pension assets, announced yesterday that it is looking to “identify a firm or firms” to provide “investment analysis, evaluation, and advice” on developing “a comprehensive and prudent divestment strategy to preserve the retirement funds of City employees and address climate change risks, consistent with fiduciary duty”.

The Employees’ Retirement System, the Teachers’ Retirement System and the Education Retirement System are part of the RfP

The RfP follows Stringer’s “ground breaking” announcement last January that the City’s five public pension funds would be the first in the US to explore divesting their fossil fuel holdings, estimated to be worth around $5bn, within five years.
In April, the Comptroller’s Office put out a call to the market for views on how to structure its pioneering RfP.
RI reported in September that Stringer had described market interest in the request as “tremendous”, speaking during Climate Week in New York.
Only three of the five funds overseen by Stringer – representing 70% of the City’s pension assets – are, however, now participating in the process, according to the RfP document. They are New York City Employees’ Retirement System, the Teachers’ Retirement System of the City of New York, and the New York City Board of Education Retirement System. The New York City Police Pension Fund and the New York City Fire Pension Fund are not named.
The three participating pension systems will “seek legal advice” on any “contemplated divestment strategy or plan”, to ensure that it is consistent with their “fiduciary duty”, the document explains.It also stipulates that the “Investment Analysis Services” being put to tender will include:

(1) Surveying the divestment actions and decisions of “peer public pension funds and other institutional investors globally”;

(2) Identifying fossil fuel reserve owners and evaluating their “investment risks and characteristics” within funds’ portfolios;

(3) Identifying options for “prudent strategies” to divest from securities of fossil fuel reserve owners;

(4) Evaluating the potential impacts of divestment strategies on the risk, return, and diversification of the Systems’ portfolios; and

(5) Evaluating whether any divestment strategy should be accompanied by the “inclusion of other or substitute investments to provide risk, return and diversification characteristics equivalent to that of the assets considered for divestment”.

Cost will be “material” when assessing proposals, the RfP states, but “quality of approach” and “quality and depth of experience and capabilities” are given the largest weighting (40% each) in the evaluation criteria.
The successful applicants will be given a year-long contract, with an option to renew for up to two additional years, to develop the divestment strategy. The contract is anticipated to begin next December.
The deadline for proposals is the 8 February 2019. A month before this date (8 January) the Comptroller will hold a “Pre-proposal Conference” at his New York office, which applicants are “encouraged” to attend.
“Divestment is a critical part of our strategy to fight climate change while insulating our pension funds,” added New York Mayor, Bill de Blasio. “Fossil fuel companies have misled the public for too long, and we must take action now to protect our portfolios as well as our planet for future generations. I thank the Comptroller and the rest of my fellow Trustees for standing strong as we continue taking these steps to divest from fossil fuels”.