• NYC pension funds, managing nearly $300 billion, warn BlackRock and Fidelity remain “insufficiently aligned” with net zero goals
• System may re-bid or terminate mandates, including exposure tied to a previously flagged $42 billion allocation
• Funds cut financed emissions by over 48% while delivering a 10.3% return, exceeding 2025 climate targets

One of the largest public pension systems in the United States has warned that two of the world’s biggest asset managers are falling short of its climate expectations, raising the prospect of mandate terminations or reallocation of capital.

New York City’s pension funds said BlackRock and Fidelity remain “insufficiently aligned” with their net zero requirements. The assessment forms part of the Fiscal Year 2025 Annual Climate Reports and comes as the system prepares to enforce stricter climate-linked mandates.

The funds collectively manage close to $300 billion across three major systems. These include the New York City Employees’ Retirement System, the Teachers’ Retirement System, and the Board of Education Retirement System. The Comptroller acts as investment advisor and custodian, setting policy direction and oversight.

Net Zero Targets Drive Mandate Risk

The warning reflects a broader shift in governance. In 2022, pension boards adopted a Net Zero Implementation Plan targeting full portfolio decarbonization by 2040. Asset managers must submit credible net zero strategies by 2025.

The latest findings build on earlier recommendations from former Comptroller Brad Lander. He had urged the funds to reconsider mandates tied to BlackRock, Fidelity, and PanAgora. His focus centered on whether managers had submitted decarbonization plans aligned with the system’s climate goals.

Lander also raised concerns about evolving engagement strategies. He argued that responses to U.S. regulatory developments, including reporting expectations tied to the Securities and Exchange Commission, had led some managers to take a more cautious approach to proxy voting and corporate engagement.

At the time, BlackRock responded directly, stating: “another instance of the politicization of public pension funds, which undermines the retirement security of hardworking New Yorkers.”

Diverging Alignment Across Managers

The new report indicates uneven progress across asset managers. PanAgora has improved its approach and now shows stronger alignment with the pension system’s expectations.

BlackRock and Fidelity, however, remain below threshold. The designation of “insufficiently aligned” places both firms at risk of mandate review. For institutional investors, this reflects a shift from engagement to enforcement.

The pension system’s stance signals that climate alignment is no longer a soft expectation. It is becoming a contractual requirement tied to capital allocation.

RELATED ARTICLE: Lander Urges NYC Pension Funds to Drop BlackRock, Fidelity, and PanAgora Over Weak Climate Stewardship

Strong Returns Alongside Emissions Cuts

Despite the pressure on managers, the pension funds reported significant internal progress. The system has reduced its financed greenhouse gas emissions footprint by nearly half since 2019.

The Comptroller’s office recorded a 48.13% weighted average reduction in Scope 1 and 2 financed emissions across the three systems. Individual results show emissions intensity falling by 49% for the Teachers’ Retirement System, 46.68% for NYCERS, and 45.72% for BERS.

Each system exceeded its interim 2025 targets, which ranged from 22% to 32%. The results position the funds well ahead of their 2040 net zero trajectory.

Financial performance has remained strong. The pension system reported a 10.3% net return for 2025, demonstrating that emissions reductions have not come at the expense of investment outcomes.

NYC Comptroller Mark Levine said: “The climate crisis has a direct impact on our global economy, and our pension systems are doing the hard work of protecting retirees while advancing a transition to a low-carbon economy. The progress laid out in this report is a reflection of the important role that reducing emissions exposure, investing in the clean energy transition, and holding companies accountable plays in smart pension management.”

What This Means for Global Asset Managers

For C-suite leaders and institutional investors, the implications extend beyond New York. Large asset owners are moving from pledges to enforcement. Climate alignment is now tied directly to mandates, fees, and long-term relationships.

The NYC pension system’s scale gives it influence. Decisions affecting even a portion of its allocations can shift capital flows across markets. Asset managers face growing pressure to demonstrate credible transition plans, measurable emissions reductions, and active stewardship.

The message is clear. Climate performance is now a core component of fiduciary duty. Funds that fail to adapt risk losing access to some of the largest pools of institutional capital in the world.

As regulatory scrutiny intensifies and asset owners sharpen expectations, the balance between financial returns and climate alignment is no longer theoretical. It is being tested in real time, with capital moving accordingly.

ESG News Editorial Team

The ESG News Editorial Team is comprised of veteran financial journalists and sustainability analysts dedicated to providing real-time, objective reporting on global ESG regulations, climate finance, and corporate governance. Our desk monitors daily developments from the SEC, IFRS, CSRD and international regulatory bodies to ensure our 1M+ readers receive accurate, data-driven insights into the evolving sustainable investment landscape. Follow the ESG News Editorial Team for expert reporting on global sustainability standards, ESG disclosures, and climate policy. Access over 10,000 investigative reports and real-time updates.