NYSTRS’ Retirement Board adopted a climate change action plan as an important first step to mitigate climate change risks and opportunities related to the System’s investment portfolio.
The action plan – which calls for ceasing further investment in 20 oil and gas holdings and thermal coal reserve holdings with a market value of $1 billion and divestment of $66 million worth of other thermal coal holdings – comes following the Retirement Board’s methodical and deliberative process to analyze climate risks to its investment portfolio and is consistent with its fiduciary duties to provide retirement security to the System’s nearly 435,000 members.
The Board unanimously adopted its action plan after determining there is a rational nexus between long-term investment risks facing the companies in the fossil fuel industry and the long-term risks they pose to the System’s investment in such companies.
The actions being taken by the System are detailed in the Update to the Legislature Regarding NYSTRS’ Deliberative Process to Address Climate Risk and Opportunities, published following a Retirement Board meeting held virtually Dec. 28. Specifically, the initial climate action plan calls for:
- Divestment from all directly held public equity thermal coal holdings that derive more than 10% of their revenue from activities related to thermal coal (i.e., the Divestment List).
- Creation of a Restricted List to "freeze" or prohibit directly held internal and passive external public equity portfolios from further purchases of certain carbon-intensive fossil fuel holdings, including:
- The 10 largest positions held by the System in companies that have more than 0.3 gigaton
of potential CO2 emissions from thermal coal reserves.
- The 10 largest positions held by the System in companies that (i) derive more than 20% of their revenue from oil and gas, or (ii) have more than 0.1 gigaton of potential CO2 emissions from oil and gas reserves.
- Companies that derive more than 10% of their revenue from activities related to oil sands.
- Prioritizing the companies on the Restricted List for engagement efforts, to the extent that the System directly holds equity securities in such companies, seeking to engage with such companies on their climate transition plans.
- Revisions to NYSTRS’ Stock Proxy Voting Policy to more clearly articulate the System’s use of proxy voting to affect climate-friendly change among its portfolio holdings.
- Participation as an Investment Advisory Group member of the Value Reporting Foundation’s Sustainability Accounting Standards Board to support the global adoption of environmental, social and governance ("ESG") sustainability reporting standards.
The action plan will be implemented in a timely and prudent manner, and the Divestment List and Restricted List will be periodically updated to reflect current conditions. Using market values as of September 30, 2021, the estimated aggregate market value of holdings on the Divestment List is approximately $66.3 million, and the estimated aggregate market value of holdings on the Restricted List is $1.036 billion.
"NYSTRS fully understands its important responsibility as an institutional investor to actively pursue the path to a climate-conscious future," said NYSTRS Executive Director & Chief Investment Officer Thomas K. Lee. "This initial climate action plan squarely puts the System on that path while remaining consistent with NYSTRS’ fiduciary duties."
The Board has long diligently and thoughtfully considered complex ESG matters and how they relate to the System’s long-term investments, and is creating a pathway to effectively integrate ESG factors in a responsible manner.
In the resolution adopting the climate plan, the Board noted that these actions are "in the best interests of the System’s members and beneficiaries, consistent with the Board’s fiduciary duties, for the System to take initial action to mitigate climate change risks in the System’s portfolio."
Further details of the action plan, including the Board’s commitment to continue its deliberative process in 2022 and beyond, are found in the Update, which is available on the About Us > Investments page, and the press release.