NYC Comptroller Brad Lander formally recommended that three major city pension systems re-evaluate and potentially rebid the $42.3 billion US public equities index mandate currently managed by BlackRock.
The pension systems are the New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System (TRS), and Board of Education Retirement System (BERS).
The recommendation stems from a comprehensive review that found BlackRock’s climate-related stewardship and decarbonization plans did not meet the pension systems’ fiduciary expectations for managing systemic climate risk.
Inadequate climate action:
Comptroller Lander’s update to the pension fund trustees follows the systems’ 2022 commitment to a net-zero implementation plan with a goal to achieve net-zero emissions across their portfolios by 2040. The review evaluated 49 public market managers, finding that 46 submitted credible plans. However, BlackRock, along with two other firms, Fidelity Investments and PanAgora, fell short of the established standards.
Lander specifically criticized BlackRock’s approach, noting the firm has scaled back its proactive engagement with US portfolio companies on climate action, which he argues is an “abdication of financial duty” that unnecessarily puts the pension funds’ long-term value at risk. This restrictive approach, according to Lander’s office, was undertaken partly in response to new US regulatory requirements but contrasts sharply with the more robust climate engagement maintained by other large asset managers, such as State Street.
BlackRock defends strategy:
In response, BlackRock has pushed back, calling the Comptroller’s claims “another instance of the politicization of public pension funds.” The firm maintains that its investment strategy is aligned with delivering consistent returns for the city’s public-sector employees and highlights its decades-long history of serving New York City’s pension plans. BlackRock contends that its focus is on delivering investment performance while adhering to legal and fiduciary obligations to clients with a range of investment objectives.
Next steps:
The recommendation now places the decision in the hands of the respective pension boards. If adopted, moving a mandate of this magnitude would mark one of the most significant climate-related actions ever taken by a US public pension fund, setting a powerful precedent for institutional investors globally. Lander also recommended terminating smaller mandates with Fidelity and PanAgora for similar failures in climate risk management.
Backdrop:
The development is part of a broader, intensifying national debate over ESG investing. Public pension funds, particularly in Democratic-led states and cities, are under increasing pressure from environmental advocates and climate-conscious officials to divest from fossil fuels and push for strong corporate decarbonization plans, viewing climate risk as an inherent financial risk to long-term returns.
Concurrently, BlackRock and other large asset managers have faced significant pushback from Republican-led states, which accuse them of using ESG policies to boycott fossil fuel companies.
