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New York State Common urged to create investment standards on climate change

An advisory panel on environmental investing has recommended that the New York State Common Retirement Fund, Albany, establish strict investment standards to meet climate change goals, expand hiring to make the pension fund more skillful in addressing environmental issues and achieve a series of investment goals by 2030 to reduce climate change investing risks.

"It's an ambitious goal," Thomas DiNapoli, the state comptroller and sole trustee of the $197.3 billion pension fund, said in an interview Tuesday. His staff will prepare an "action plan" in a few weeks to address the panel's recommendations, he said.

Achieving the goals won't require state legislation, new regulations or appropriations from the legislature, he said.

"It's a very complex issue," said Mr. DiNapoli, adding that any changes will be made with the pension fund's fiduciary duties in mind. "It's a very exciting but challenging task."

The six-member panel of environmental and investment experts was convened in March 2018 by Andrew Cuomo, New York's governor, and Mr. DiNapoli to help the pension fund reduce the risk of investing in companies with current or potential environmental liabilities.

"We saw a very strong business case for climate change," Joy-Therese Williams, chairwoman of the Decarbonization Advisory Panel, said in an interview. She is senior adviser at Mantle314, a Toronto climate advisory firm.

Establishing minimum standards for retaining and seeking investments "would be a very good tool" that offers "flexibility in arriving at a certain goal" of achieving sustainable investments by the pension fund, she said.

"We see this as a journey," said Ms. Williams, noting that some recommendations could be achieved relatively early while others will be phased in.

The panel didn't recommend a formal policy of divesting specific stocks or categories of stocks. Instead, the panel said that establishing minimum standards would create a mechanism for pension fund executives to assess the sale of environmentally unfriendly stocks and to avoid investments that pose a future environmental risk. "We want a thoughtful process and a credible analysis," she said.

Mr. DiNapoli said he didn't know how much of the pension fund's assets already meet the panel's proposed guidelines. However, he noted that the fund already has invested more than $4 billion in a low-emissions index fund and has invested or has set aside for future investments $6 billion for sustainable investments. Fixed-income investments, which represent about one-fourth of total plan assets, probably meet the guidelines, he said.

The key recommendation by the panel calls for the pension to have its entire portfolio "with a 2-degree or lower future by 2030 in accordance with climate science consensus," a panel report said. The number refers to effort by countries and companies to keep the average global temperature increase to below 2 degrees Celsius by 2050.

The report recommended that the pension fund "establish a new 'climate solutions' allocation through which the fund can substantially increase its commitment to investments with a proactive approach to climate risk and opportunity in the near term."

The panel also recommended that the fund create a new position, head of climate solutions, to direct these efforts and to add "a well-resourced team" to achieve the goals.