New York City seeks advice on $5bn fossil fuel divestment

Request for Information launched in preparation for exit strategy

The Office of New York City Comptroller Scott Stringer has put out a call to the market for views on how to develop a fossil fuel divestment strategy for its pension pot.
The Request for Information (RFI) was issued last week on behalf of three of the five funds overseen by the Office of the Comptroller: the Teachers’ Retirement System of the City of New York ($73bn), New York City Employees’ Retirement System ($66bn) and the New York City Board of Education Retirement Systems ($6bn).
It calls for “insights and knowledge” on how to develop and structure Requests for Proposals (RFPs) relating to “services to evaluate and determine a prudent strategy for potential divestment and exclusion of securities issued by companies owning fossil fuel reserves from the investment portfolios of the Systems within a five-year period, consistent with fiduciary duty and the investment objectives of the Systems”.
It follows Stringer’s announcement in January that the five funds would divest some $5bn of fossil fuel holdings by 2023 “in a responsible way that is fully consistent with fiduciary obligations”.
“It’s complex, it will take time, and there are going to be many steps,” he said at the time. “But we’re breaking new ground, and we are committed to forging a path forward while remaining laser-focused on our role as fiduciaries to the Systems and beneficiaries we serve.”
Now, experts from “a broad and diverse array of perspectives” are being encouraged to participate and share their expertise, including those from “investment, finance, business, legal, scientific and environmental policy communities”.The RFI states that an investment consultant will be used to provide analysis, evaluation and advice to the boards of each fund on investment risks posed by fossil fuel reserve owners; the impacts of potential approaches to divestment on the risk, return, and diversification of the Systems’ portfolios; and the development of a strategy and timetable for divesting.
It adds that legal opinion will be sought by the Comptroller “to determine whether any proposed divestment plan and actions by the Boards would comply with the Boards’ fiduciary duty to beneficiaries”.
The request for information has a submission deadline of 1 June 2018.
Taking a less radical stance than New York City, New York State last month announced the creation of a decarbonisation advisory panel for the $209bn New York State Common Retirement Fund. Appointed by New York State Governor, Andrew Cuomo and State Comptroller, Thomas DiNapoli, the panel will advise the Comptroller, as trustee of the fund, on how to optimise opportunities arising within the emerging low-carbon economy and reduce investment risk relating to climate change – rather than exiting fossil fuel stocks. The panel includes Walden Asset Management Director Tim Smith, Harvard Business School’s George Serafeim and sustainable investing stalwart Cary Krosinsky.