New York City (NYC) Comptroller Brad Lander has recommended that the city’s retirement systems terminate a US$42.3 billion mandate with BlackRock citing the asset manager’s “conservative” interpretation of rule changes governing engagement with equity holdings over 5%.
Lander, who leaves office at the end of the year, made the recommendations as part of a review to establish whether 49 public markets managers’ decarbonisation plans were aligned with the objectives of the city’s Net Zero Implementation Plans to achieve net zero emissions by 2040.
The call impacts the New York City Employees’ Retirement System (NYCERS), Teachers’ Retirement System (TRS), and Board of Education Retirement System (BERS), which have a collective US$228 billion AUM.
Lander said BlackRock’s decision to cease proactive engagement on proxy voting issues with US firms in which it owns a 5% stake or higher – following new rules introduced in February – meant the manager “could not sufficiently encourage portfolio companies to take concrete decarbonisation actions”.
The recommendations contrasted BlackRock’s approach with that of fellow equity index manager State Street, which was described as demonstrating a “robust and systematic stewardship strategy that addresses prioritisation and escalation of engagement and voting to advance decarbonisation”.
Because the restrictions do not apply outside the US, the comptroller recommended that BlackRock be retained for non-US equity index mandates, on the understanding that these are managed in accordance with the firm’s Climate and Decarbonisation Stewardship Policy.
Armando Senra, Head of the Americas Institutional Business, said BlackRock would “look forward to demonstrating the breadth and depth of our capabilities and the tremendous value we deliver” to the city and its public servants if trustees acted on Lander’s recommendations.
As well as calling for the three systems to put out for tender BlackRock’s US public equities index mandates, Lander’s review recommended termination of contracts with active managers Fidelity and PanAgora, whose decarbonisation plans were also found wanting.
The three NYC retirement systems have collectively achieved a 37% reduction in financed greenhouse gas emissions from a 2019 baseline, divested fossil fuel reserve owners, and scaled up climate solutions investments to US$11.9 billion, while exceeding a 7% returns target for the 2025 financial year.
