RI Americas 2016: $185bn New York State fund planning to double low carbon index strategy to $4bn

RI Americas 2016: The $185bn New York State Common Retirement Fund, the third largest pension fund in the US, is planning to double its exposure to $4bn in a low carbon index strategy that it kicked off with Goldman Sachs Asset Management (GSAM) just prior to the Paris COP21 conference in 2015, after what it said were positive environmental and financial results.
Pete Grannis, the First Deputy Comptroller in the Office of the New York State Comptroller, told the RI Americas 2016 conference in New York last week (December 6/7) that the fund would likely raise its allocation to $4bn from the initial $2bn seeding the strategy was started with.
In an interview with RI at COP21 just over a year ago, New York State Comptroller Thomas DiNapoli, who oversees the fund, had suggested it could build out the strategy, which is managed by GSAM based on index data from FTSE Russell, if the results were good: Link

Grannis told the RI Americas conference last week that performance so far had been encouraging: “It’s been in line with our expectations and with a tracking error of 0.25%. On the environmental side we’ve reduced the carbon emissions of this asset portion by 70%.We’re very pleased with how it’s going.” The fund took the initial $2bn out of its active equities portfolio and shifted it to the new index as part of a burgeoning passive investment allocation. Tracking error is the difference between a portfolio’s returns and the benchmark.

“It’s been in line with our expectations”

Grannis said the fund had also been building out other ESG investments, including a $1.5bn allocation to World Bank green bonds and a similar allocation to social housing. He said the fund would also re-file a high profile shareholder resolution for the 2017 proxy season at Exxon Mobil, the oil major, which it co-filed in 2016 with the UK’s Church of England Investor’s Group. The 2016 resolution, which urged Exxon to publish an annual assessment of the long-term portfolio impacts of public climate change policies, got the support of 38% of shareholders, as part of a campaign of similar high-scoring resolutions at oil majors around the world, many of which received majority support.