Court dismisses lawsuit to withdraw investment from NYC funds

The New York Supreme Court dismissed A case filed in May 2023 alleging that the Teachers’ Retirement System, the New York City Employees’ Retirement System, and the Board of Education Retirement System breached their fiduciary duties when they voted in 2021 to stop investing in publicly traded securities of fossil fuel reserve owners. Three pension funds filed a motion last August to dismiss the “meritorious” lawsuit. The lawsuit was dismissed for “lack of legal standing,” with the court noting that the plaintiffs suffered no harm because the three funds are “defined benefit pension plans” that entitle the plaintiffs to a “fixed benefit each month.” Accordingly, the plaintiffs “have not suffered, and will not suffer, any monetary loss based on their investment decisions.”

BlackRock Issues New Governance Guidelines for funds focused on climate and decarbonization, which differs from the BlackRock Investment Management Service (BIS) benchmark. The Decarbonization Voting Guidelines state that firms should “provide sufficient corporate information” to help determine the extent to which decarbonization and the transition to a low-carbon economy are strategic priorities. For firms that have “disclosed their purpose” to participate in this transition, such information may include a transformation strategy; reporting in accordance with International Sustainability Standards Board (ISSB) standards; and disclosure of Scope 1, 2 and material Scope 3 emissions, as well as emissions reduction targets. In the event that the BIS determines that a firm is not meeting its commitment to align with the low-carbon transition, BlackRock may vote against the election of one or more of the directors responsible for the matter.

The guidelines will apply only to funds that have climate and decarbonisation objectives, the vast majority of which are currently domiciled in Europe. To date, 83 European-based funds domiciled in Europe (representing around $150 billion in AUM as of March 2024) have been approved to use the guidelines, which will come into effect in Q4 2024. US and APAC-based funds are expected to adopt the guidelines in H2 2024, subject to fund board approval.

Science-Based Goals Initiative (SBTi) Inaugural CEO Luiz Amaral has resigned for “personal reasons.” Susan Jenny Ehr, who is currently chief legal officer, will take over as interim CEO. The move will take effect at the end of the month, and a process for recruiting a permanent CEO has begun. Amaral was appointed in February 2022, after serving for six years as global director of commodity and financial solutions at the World Resource Institute. He also previously served as head of sustainability for South America at Rabobank and head of the Brazilian delegation for sustainability criteria for bioenergy at the International Organization for Standardization. The resignation follows debates surrounding the climate initiative’s announcement in April that it would allow for the use of offsets for Scope 3 purposes, for which the board has been criticized.

Over 80 climate campaign groups and shareholders including ShareAction, ClientEarth, BankTrack and the New Climate Institute have called for offsetting activities to be excluded from “voluntary and regulatory frameworks for climate transition planning”. An open letter signed by the groups said carbon offsets “could discourage the significant investments needed to deliver profound changes across corporate value chains and economic systems”. The coalition said the call was in response to “growing pressure… to enable companies and countries to use carbon credits to offset emissions”, and in particular by the SBTi target-setting body.

CalPERS announced it has invested nearly $10 billion in new actions to invest in the global transition to a low-carbon economy, including new private market investments and an adjusted public equity index to “bolster” the pension fund’s climate-responsive investments. The announcement represents early steps toward implementing a climate investment plan presented to the CalPERS board last November. It calls for investing $100 billion in climate solutions by the end of 2030, while establishing an “enhanced accountability process” for companies to disclose and strengthen their plans to navigate the energy transition.

Wiltshire Pension Fund has awarded balanced capital mandate for Lombard Odier Investment Managers (LOIM). The £3.2bn ($4.1bn; €3.8bn) local government pension scheme has selected LOIM’s Planetary Transition strategy to fill its allocation of equities listed in its Climate Opportunities portfolio. The fund is an active equity strategy that invests in companies driving the transition to net zero emissions. The news follows LOIM’s appointment by Nest earlier this year to a global £5bn capital mandate.

Network for the Greening of the Financial System published two reports on nature risks. The first is the final version of the conceptual framework for nature-related financial risks, which aims to guide the policies and actions of central banks and financial supervisors. The design and structure of the final framework remain unchanged from the beta version. Minor changes mainly focus on factual updates and alignment with other similar frameworks that have come to the fore since the beta version was published.

The second report presents key emerging trends in nature litigation, including cases involving biodiversity loss, deforestation, ocean degradation, carbon sinks and plastic pollution. It also examines the potential implications for central banks, regulators and the financial system.

Transition Path Initiative (TPI) The Assessing Sovereign Climate-related Opportunities and Risks (ASCOR) tool expands its coverage to 70 countries in 2024, adding 45 countries based on their weights in major sovereign bond indices. The expanded universe covers more than 85 percent of global greenhouse gas emissions and 90 percent of GDP. In 2023, following a public consultation, TPI published a methodological note describing the ASCOR framework and launched the tool and the first assessments of 25 countries.

The working group published key projects recommendations for the development of a taxonomy of sustainable finance for New Zealand. The advice was developed for the Minister for Climate Change by an independent technical advisory group convened by the Centre for Sustainable Finance, with technical guidance from the Climate Bonds Initiative. Key objectives include mitigation and adaptation to climate change; sustainable use and protection of water and marine resources; protection and restoration of biodiversity and ecosystems; pollution prevention and control; and the transition to a circular economy. Priority sectors for the development of the taxonomy are: agriculture, forestry and fisheries; transport; construction and real estate; energy; and industrial manufacturing.

Other recommendations include a traffic light system to mark transitional activities and alignment with other benchmark taxonomies such as Australia and the EU. The committee proposed that the taxonomy should be voluntary in the initial phase, with the expectation that it could become mandatory after a phased approach or grace period.

Stay in New Zealand, 92 percent of investors benefited from corporate involvementshareholder action and/or active ownership as part of their climate action in 2023. The survey of the investment sector found slow progress across the board. However, only 30 per cent of investors had a strategy to achieve their net-zero emissions targets, 26 per cent had a formal target or commitment to invest in climate solutions, and less than 10 per cent had assessed their overall portfolio for exposure to physical risks related to climate change.