The New York State Common Retirement Fund, valued at an estimated $226 billion (£169bn), has made a commitment to divest from the “riskiest” fossil fuel companies that contribute to global warming by 2040.
It will review its investments in companies in the energy industry, using minimum standards to assess climate-related investment risks and their readiness towards a low carbon global economy.
While divestment is a “last resort”, the Fund will remove companies from its portfolio that fail to meet its minimum standards.
The Fund has already set minimum standards for the thermal coal mining industry and divested from 22 coal companies.
It is currently wrapping up its evaluation of nine oil sands companies and plans to develop minimum standards for investments in shale oil and gas and will be followed by integrated oil and gas, other oil and gas exploration and production, oil and gas equipment and services and oil and gas storage and transportation.
In addition, the Fund has set a goal to transition its portfolio to net zero greenhouse gas emissions by 2040.
New York State Comptroller Thomas P. DiNapoli said: “New York State’s pension fund is at the leading edge of investors addressing climate risk, because investing for the low carbon future is essential to protect the fund’s long term value.
“Achieving net zero carbon emissions by 2040 will put the Fund in a strong position for the future mapped out in the Paris Agreement. We continue to assess energy sector companies in our portfolio for their future ability to provide investment returns in light of the global consensus on climate change. Those that fail to meet our minimum standards may be removed from our portfolio. Divestment is a last resort but it is an investment tool we can apply to companies that consistently put our investment’s long term value at risk.”