New York City Comptroller calls for overhaul of pension fund managers over climate stewardship issues

New York City Comptroller Brad Lander has recommended a significant overhaul of the city’s public pension fund management as part of the ongoing efforts to align investment practices with stringent climate-related goals. Following a comprehensive evaluation of 49 public market asset managers, Lander urged the trustees of the New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System (TRS), and Board of Education Retirement System (BERS) to rebid BlackRock’s U.S. public equities index mandates, and to terminate the mandates held by active managers Fidelity and PanAgora due to inadequate decarbonization plans.

This recommendation comes in the context of the pension funds’ commitment to achieving net zero greenhouse gas emissions by 2040, a pledge made in 2023 through Net Zero Implementation Plans adopted by the pension trustees. These plans encompass interim emissions reduction targets, rigorous emissions disclosures, active engagement with asset managers and portfolio companies, increased investment in climate change solutions, and strategic divestment to mitigate climate risks. According to the Comptroller’s Office, the funds have collectively achieved a notable 37% reduction in financed greenhouse gas emissions since 2019, raised climate solutions investments to $11.9 billion, and have delivered strong returns of 10.5% for fiscal year 2025, surpassing the actuarial target.

The central issue leading to the Comptroller’s recommendation is BlackRock’s policy change triggered by regulatory shifts under the Trump administration. In February 2025, BlackRock ceased proactive engagement on proxy voting issues with U.S. companies where it holds 5% or more equity stakes, a move the Comptroller characterises as an abdication of financial duty that undermines climate stewardship. Lander highlighted that under BlackRock’s new approach, portfolio companies receive insufficient encouragement to adopt concrete climate actions, such as setting net-zero goals and aligning lobbying or capital expenditures with climate commitments. While BlackRock contends the policy shift was necessary to comply with SEC reporting requirements, other asset managers, like State Street, maintain more robust climate engagement strategies. Lander’s office found BlackRock’s broader climate stewardship to fall short of the pension systems’ expectations despite BlackRock’s efforts to expand access to its Climate and Decarbonization Stewardship policy.

Fidelity’s management of the city’s pension funds also came under criticism for adopting an overly restrictive interpretation of SEC guidance that limits engagement on decarbonization efforts for both U.S. and non-U.S. companies, thereby restricting influence on a critical systemic risk. In contrast, BlackRock’s rollback applies only to U.S. companies. Comptroller Lander recommended that the Teachers’ Retirement System terminate Fidelity’s World ex-US small-cap mandate and consider reallocating its $384 million in related assets.

PanAgora, the only quantitative manager in the pension systems’ portfolio, was criticised for an extremely limited approach to climate engagement. The company’s efforts focus primarily on emissions disclosure without actively encouraging portfolio companies to set emission targets or adopt transition plans, missing opportunities for beneficial decarbonization strategies. Lander proposed termination of PanAgora’s U.S. small-cap equity mandate by NYCERS and TRS.

Beyond managerial changes, the Comptroller’s office is actively engaging with the highest-emitting portfolio companies directly, independent of asset managers. This includes a focus on key sectors such as utilities, responsible for roughly 20-30% of the systems’ financed emissions. The office participated in an advisory group convened by the Electric Power Research Institute aiming to create a target-setting protocol for utilities, branded “SMARTargets.” Despite industry efforts, the methodology is not yet considered reliable enough to avoid greenwashing risks, prompting Lander to convene over 60 asset owners, managers, service providers, and utility representatives to seek consensus on effective engagement tools.

Furthermore, Comptroller Lander has proposed expanding fossil fuel divestment policies further downstream. In June 2025, he urged the pension fund boards to cease new investments in midstream and downstream fossil fuel infrastructure, including pipelines and LNG terminals, complementing the 2023 ban on upstream fossil fuel investments in private markets. This move aims to reduce systemic climate risks and avoid financing infrastructure that contradicts the Paris Agreement’s climate goals, thereby safeguarding both environmental and financial sustainability.

The Comptroller’s recommendations and proposals come amid broader political and financial pressures. BlackRock publicly responded to the Comptroller’s announcement by framing it as politicisation that threatens public pension security. The issue is poised to gain further significance under the forthcoming administration of Mayor-elect Zohran Mamdani, who will influence pension board appointments and decisions.

Overall, New York City’s pension funds remain firmly committed to their Net Zero Implementation Plans established in 2023, which set ambitious climate-related targets and have already driven meaningful emissions reductions and climate investments. The Comptroller’s actions signal a rigorous approach to ensuring asset managers align with these goals, reflecting growing expectations that fiduciary responsibility includes proactive climate risk mitigation in the stewardship of public retirement assets.