Big Apple Mistake – IPFI Responds to New York City Divestment RFI

Arlington, VA – The Institute for Pension Fund Integrity (IPFI), a non-profit organization which seeks to ensure that state and local leaders are held responsible for their choices in public pension investment, responded today to the New York City Comptroller’s request for information (RFI) regarding how to divest city pensions from energy company holdings. IPFI’s fundamental goal is to keep politics out of the management of pension funds and the RFI response details the detrimental cost that divestment would have on NYC’s already underfunded pensions.

By calling for divestment from energy holdings, NYC Comptroller Scott Stringer and Mayor Bill de Blasio are clearly pushing a political agenda which contradicts their fiduciary duty to maximize returns with a reasonable risk. The divestment of about $5 billion in assets invested in over 190 energy companies would reduce plan diversity and is estimated to negatively affect plan returns.

New York City’s pension funds are already in serious financial peril and introducing divestment will worsen the current pension crisis in the Big Apple. NYC’s five pension funds are less than 70% funded, with almost $142 billion in unfunded liabilities. Comptroller Stringer must also consider the following:

  • Experts have assessed that divestment campaigns have never resulted in increased value for pension plans.
  • Reports detail that energy holding divestment would result in an immediate frictional cost of about $25 million for New York City
  • Over the next 50 years, New York stands to lose $1.515 billion from their pension funds if they divest from energy holdings.

“Our goal at IPFI is to ensure that public pension fund managers are adhering to their fiduciary responsibility so that pension funds are properly funded for the retirees who rely on them,” said Christopher Burnham, IPFI’s President and former Connecticut State Treasurer. He continued, saying that “divestment to further a political agenda, which de Blasio and Stringer are seeking to do, is directly contrary to their fiduciary duty. Their plan threatens the already underfunded city pensions and places an unnecessary burden on the taxpayers and current city employees.”

In the RFI response, IPFI emphasizes that divestment is an irresponsible course of action that will politicize pension funds, undermine the financial health of the pension fund, and violate the fiduciary responsibility of fund management. Divestment will not “protect the long-term interests of the Systems’ beneficiaries, “as the RFI claims, but will simply expose police officers, teachers, firefighters, other pensioners and the taxpayers to unnecessary financial risk.

For more information about IPFI’s position and to read the RFI response, please click here. For a recent presentation on IPFI’s mission, click here.

The Institute for Pension Fund Integrity seeks to ensure that local, state and federal leaders are held responsible for their choices in investment, led not by political ideation and opinion but instead by fiduciary responsibility. IPFI is a non-partisan, non-profit organization based out of Arlington, Virginia, and spearheaded by former Connecticut State Treasurer Christopher B. Burnham.