In the latest demonstration of institutional asset owners’ commitment to climate action, New York State Common Retirement Fund (CRF), the third largest public pension fund in the US with $184.5 billion in assets, has joined the Portfolio Decarbonization Coalition (PDC).
The CRF is the first major US pension fund to join the Coalition’s 28 members, who between them control over $3 trillion in assets and have pledged to gradually decarbonize a total of $600 billion by designing investment portfolios with a smaller climate change impact.
One year ago, New York State Comptroller Thomas P. DiNapoli, trustee of the CRF, announced plans at the Paris climate talks to position the Fund for a low carbon future. In partnership with Goldman Sachs, the CRF developed a low emission index, which steers assets away from large carbon emitters and increases investments in carbon-efficient companies.
“Climate change is one of the greatest risks to our pension fund’s portfolio,” DiNapoli said. “We’re reviewing and adjusting our investments to reduce that risk and take advantage of the growing opportunities of a lower carbon future. Investors are playing a key role in fostering a cleaner global economy. The PDC gives us the opportunity not only to highlight our own activities in this regard, but also to share insights and challenges with counterparts around the world.”
"Investments with more carbon translate to higher risk, not just from potential carbon fees or pricing, but also from shifts in technology that can leave high carbon assets stranded," said Erik Solheim, Head of UN Environment. UN Environment’s Finance Initiative is a co-founder of the PDC.
“The success of the Portfolio Decarbonization Coalition is a clear signal to both governments and companies that climate change, and the corporate response to it, is critical to shareholder value and investor interests going forward,” said Solheim.
CRF’s action comes at a time of intense efforts by the financial community to prevent market shocks from the widespread mispricing of climate change risks.
Last month, the G20’s Task Force on Climate-related Financial Disclosures co-chaired by former New York Mayor Michael Bloomberg and Bank of England Governor Mark Carney recommended full and standardized disclosure by companies and investors of financial risks and opportunities from climate change.
Other investor members of the PDC include major European funds such as France’s ERAFP ($26.9 billion) and FRR ($38.5 billion), the Dutch giant ABP ($481.1 billion) and the world’s largest insurance company, Germany’s Allianz Group.
“We are seeing significant international collaboration among leading asset owners to push on climate issues,” said Lance Pierce, President of CDP North America, the international not-for-profit organization holding the world’s largest collection of self-disclosed corporate environmental data and one of the Portfolio Decarbonization Coalition organizers.
Pierce added, “Climate change is requiring transformational changes in the economy in order to safeguard assets and supply chains, and presents a significant economic growth opportunity. The US renewable energy sector employed 769,000 people and the solar industry grew 12 times faster than overall job creation in 2015. Investors are realizing they can reduce carbon, reduce risk and generate steady financial returns as well as jobs.”
About New York State Common Retirement Fund’s sustainability investing
DiNapoli has positioned the Fund in the vanguard of institutional investors who seek out and promote sustainable investing that takes environmental, social and corporate governance considerations into account as part of their long-term strategy. The Fund is committed to the belief that well-managed businesses, which focus on the long-term health of the company and work to avoid environmental damage or harm to the communities in which they operate, are more likely to produce sound returns. A growing body of academic research confirms this and investment firms that integrate sustainability in their decisions have performed well for the Fund.
CDP, formerly Carbon Disclosure Project, is an international, not-for-profit organization providing the largest global system for companies and cities to disclose and manage vital information concerning climate change, water and forest risk commodities information. Backed by 830 institutional investors with assets of US$100 trillion, CDP puts these insights at the heart of strategic business, investment and policy decisions. More than 5,800 companies disclosed environmental information through CDP in 2016. Please follow us @CDP to find out more.
About the Portfolio Decarbonization Coalition
The Portfolio Decarbonization Coalition was co-founded by CDP, the UN Environment Finance Initiative, The Fourth Swedish National Pension Fund (AP4) with assets of $34 billion, and Amundi, Europe’s largest asset manager with more than $1.07 trillion in assets. In the 15-month lead-up to the December 2015 Paris climate talks the Coalition received $600 billion in commitments from investors of capital positioned towards a low-carbon economy, six times more than its $100 billion goal. For more information, please visit: www.unepfi.org/pdc
About UNEP FI
The UNEP Finance Initiative (UNEP FI) is a unique partnership between UNEP and a global network of over 200 banks, insurers and investors from 51 countries.
Created in the wake of the 1992 Earth Summit UNEP FI’s mission is to mainstream the integration of sustainability across the finance sector. It provides a neutral space to convene stakeholders and acts as a platform at the intersection between finance, science and policy. Please visit www.unepfi.org, for more information.