New York state appeals court judges have upheld a lower-court ruling rejecting allegations that three New York City pension funds violated their fiduciary duty by divesting of fossil fuel investments.
"The plaintiffs' arguments are speculative," said the 5-0 opinion on March 11 by judges in the appellate division of the New York State Supreme Court.
Documentary evidence and "the absence of any support that the plans might be unable to cover their obligations" were cited by the judges in their opinion. (In the New York state court system, appellate divisions of the Supreme Court are the second highest courts to the Court of Appeals).
"Discretion to make investment decisions for public retirement systems is vested in politically accountable trustees, and their exercise of that authority cannot be encroached upon by the Legislature or the courts," they wrote in Wayne Wong et al. vs. New York City Employees' Retirement System et al.
The appeals court judges agreed with New York County Supreme Court Judge Andrea Masley's ruling in July that the plaintiffs lacked standing to sue because they couldn't show any losses caused by the actions by the New York City Employees' Retirement System, New York City Teachers' Retirement System and New York City Board of Education Retirement System.
They account for $208 billion of the $284.3 billion in total assets in the New York City Retirement System. The pension funds covering police and firefighters haven't participated in fossil fuel divesting. Each of the five pension funds in the city system is run by independent boards of trustees.
Masley's ruling, which was supported by the appeals court judges, cited a 2020 U.S. Supreme Court decision, Thole et al. vs. U.S. Bank NA, that said defined benefit plan participants lacked standing to sue unless they could prove they were harmed by a sponsor’s action. The 5-4 decision ruled for the defendant plan sponsor.
Four current and former employees sued the pension funds in May 2023. According to the original complaint, three are members of Americans for Fair Treatment, which advocates that "all public-sector employees should have the freedom to choose to join a union or to abstain from joining a government union, an employee association, or other group," according to its website.
The organization, also a plaintiff, provides information about quitting union membership.
The appeals court ruling "is another important victory for fiduciaries tasked with safeguarding pension assets and allows us to continue our important work to align our investment strategies with the evolving economic risks and opportunities posed by climate change," said Brad Lander, the city comptroller and custodian for the pension funds, in a March 11 news release.
“These dangerous and misguided attempts by anti-ESG (environmental, social and governance) forces threaten the long-term financial security of pensioners for generations to come and seek to prevent pension system trustees from assessing the very real risks of climate change to their investment portfolios,” he said.
