NYC comptroller calls for city pensions to withdraw $42bn mandate from BlackRock

NYC Finance Official Calls for Divestment from BlackRock

New York City’s finance chief has urged three of the city’s largest pension funds to cut ties with BlackRock, which manages over $42 billion, in an effort to leverage their market power to combat climate change.

City Auditor Brad Lander highlighted on Wednesday that BlackRock, along with Fidelity and PanAgora, has not taken climate risks as seriously as desired. He mentioned, as part of his recommendations, that the pension fund is beginning the process of finding a new financial advisor to manage their portfolio.

Lander, a Democrat, is part of a larger trend among elected officials who are looking to advance environmental and social goals through their pension investments, focusing on major firms like BlackRock and State Street.

This initiative contrasts with the actions of some conservative activists over the last few years, especially as movements to divest from fossil fuel-heavy asset managers gain momentum.

Last year, Texas took steps to exclude asset managers, including BlackRock, for their stance against fossil fuel investments. Additionally, the state attorney general and ten Republican-led states sued three major index fund managers regarding their coal investment strategies.

Lander expressed that BlackRock has not fulfilled certain climate-related expectations from the pension funds, such as pushing portfolio companies to adopt measurable actions like net-zero targets and clear transition plans.

The outgoing comptroller, who collaborated with Mayor-elect Zoran Mamdani during his recent campaign, may also seek a position in Congress.

In his advocacy, Lander criticized BlackRock’s conservative interpretation of guidelines from the U.S. Securities and Exchange Commission (SEC) issued in February, suggesting it differs from other managers in a way that undermines environmental, social, and governance considerations in investments.

“Larry Fink, the CEO of BlackRock, has emphasized the financial implications of climate risk,” Lander told the Financial Times, labeling the decarbonization approach presented by BlackRock as insufficient.

He noted he doesn’t agree with BlackRock’s reading of the SEC’s guidelines, indicating that State Street, the second-largest manager of New York City’s pension funds, is indeed capable of meeting the city’s climate criteria.

“It’s hard to say if BlackRock is simply being cautious or if there’s more to it. What is crystal clear, though, is that climate risks pose real financial threats. We need asset managers who are mindful of the long-term risks related to our investments,” Lander remarked.

The suggestions found in Lander’s report do not pertain to the roughly $9 billion that BlackRock manages for the city’s pensions, which includes diverse investments in mortgage markets and government bonds.

Armando Senra, who oversees BlackRock’s institutional business in the Americas, responded that his firm has engaged with the city’s pension investment team to explore a broader array of climate action strategies.

“You assert that BlackRock is failing in its financial responsibilities and jeopardizing New York City’s pension security,” Senra stated. “Such remarks reflect a politicization of public pension funds, which diminishes the retirement security for diligent New Yorkers.”

A spokesperson for Comptroller-elect Mark Levine acknowledged the update on the Net Zero Implementation Plan, stating they would assess the recommendations provided.