New York City’s five pension systems fund the retirement security of more than half-a-million public sector workers – the teachers, health care workers, firefighters, police officers, payroll administrators, and other retirees who have served our city for decades. The City’s pension funds are among the largest in the country (collectively worth $248 billion as of January 2021), which affords them power and potential to influence today’s capital markets, and by extension, the broader economy. As a fiduciary for these funds, the New York City Comptroller plays a critical role in overseeing the city’s investment portfolios to ensure they are invested responsibly, so our public sector workers and their communities can have the secure future they deserve.
Modern Portfolio Theory looks at the risks of each investment in the context of an overall diversified portfolio, but does not traditionally consider the broader systemic risks facing even -- or perhaps especially -- the most diversified portfolios. Leading economists, investors, and analysts increasingly recognize that highly-diversified funds can manage the risk facing individual companies or sectors, but are still highly exposed to systemic risks facing the economy as a whole. Serving as a fiduciary for these funds must include strong attention to those core systemic risks, including the climate crisis, rampant inequality, and racial injustice.
Only by actively working to address these broader risks can asset managers genuinely help to provide a more stable long-term future for those they serve as fiduciary. This requires active leadership and new thinking: where large institutional investors like the City’s pension funds cannot avoid systemic risks and structural challenges, they have to take them on. In the interest of these workers and community-members, the public pension funds have the responsibility and opportunity, consistent with their fiduciary duties, to lead efforts for transformational change in our financial system.
Brad will build a world-class team that takes a strategic and integrated approach to maximizing risk-adjusted market returns, determining and adjusting asset allocations, managing risk, minimizing fees to outside investment managers, and investing for the long-term, while remaining attentive to the fund-level and systemic risks posed by dangers including climate change and inequality. This includes holding corporations and fund managers accountable for inequitable corporate governance practices; a transition away from fossil fuels to clean energy; investing in our communities for long-term innovation and productivity; focusing on long-term value rather than short-term speculation; and working to transition to an economy that works for all of us, not just the privileged few.
A Strategic Plan for Responsible Fiduciary Investing
Too often, environmental, social, and governance (ESG) concerns are put forward one-at-a-time, in a manner that is reactive and disconnected from overall strategic decision-making about an investment portfolio. This lack of ESG integration makes it more difficult to set priorities, manage risk and add value (to the funds, as well as to ESG efforts). To achieve better ESG integration and adopt more coherent and effective strategies, Brad will work with fund trustees to undertake a proactive and strategic process to produce a Strategic Plan for Responsible Fiduciary Investing, to be reviewed once every two years. Trustees will work with their members to engage other stakeholders including workers and consumers of companies that the pension funds are invested in, investors, businesspeople, issue activists, and community leaders.
Through this strategic planning process, each fund will develop a fiduciary blueprint, which would be finalized and adopted by its trustees. These blueprints would then be utilized by the Comptroller’s Bureau of Asset Management in its investment research and advice to the funds, and also as a platform for working with other ESG investors on coordinated strategies.
Key areas that the process will focus on include:
Holding corporations and fund managers accountable for corporate governance practices that are consistent with stronger long-term investment returns; including compliance with the Paris Climate Agreement, workers rights, wages, and safety; encouraging worker representation on corporate boards, restricting stock buybacks, and boardroom diversity;
Divesting from activities that expose the funds to long-term risk where satisfactory changes cannot be made through shareholder action; including aggressively shepherding fossil fuel divestment, continuing to avoid private prisons and gun-manufacturers, and reviewing the funds’ positions with risky and speculative assets including hedge funds, private equity, and private real estate funds;
Focusing Economically Targeted Investments (ETIs) in construction and preservation of affordable housing, financing a green economy, and providing start-up capital to MWBE and Black- and Brown-owned businesses;
Increasing the diversity of the funds’ asset managers and advisers, and other strategies for addressing the cycle of racial wealth and income inequality; access to capital and wealth-building for historically marginalized groups, and prioritizing investment in communities for long-term innovation and productivity.
Responsible Investment Advisory Group
Brad has recruited a “Responsible Investment Advisory Group” to advise him, his campaign team, and his transition team on issues including asset and portfolio management, environmental, social, and governance (ESG) investing, and corporate governance. Affiliations listed for identification purposes only.
Vonda Brunsting, Program Manager, Institute for Responsible Investment, Harvard Kennedy School (fmr. SEIU Capital Stewardship)
Sean Campbell, Founder, Capital for Communities (fmr. Macquarie Group, Marathon Asset Management, D.E. Shaw & Co.)
Demetric Duckett, Managing Director, Capital for the New Majority, Living Cities
Eric Horvath, Director of Capital Strategies, Common Future
Jon Lukomnik, Sinclair Capital, author of Moving Beyond Modern Portfolio Theory (fmr. NYC Deputy Comptroller for Asset Management)
Angela Matheny, Director of Investment Staff & Diverse Manager Equity at Crewcial Partners
Keith Mestrich, retired President & CEO of Amalgamated Bank
Carlos Naudon, President, Ponce de Leon Federal Bank
Lenore Palladino, Assistant Professor of Economics and Public Policy, UMass Amherst, Fellow at Roosevelt Institute
Delilah Rothenberg, Founder and Executive Director, Predistribution Initiative
Robin Varghese, Associate Director, Knowledge and Innovation, Economic Justice Program, Open Society Foundations
CONCLUSION
As Comptroller, Lander will lead a team to maximize risk-adjusted market returns through responsible fiduciary investing, bringing an equity and sustainability lens to the portfolio, and securing long-term sustainable growth – to guarantee retirement security for our city’s teachers, firefighters, nurses, and payroll administrators, along with a better future for their families and neighborhoods.