Climate Impact Investment Strategy

By Ross Kerber and Isla Binnie

(Reuters) – Moving funds from coal assets to a responsible-investment exchange-traded vehicle has provided significant gains for the New York State Insurance Fund in evaluating the climate and social effects of its holdings, a senior executive stated on Thursday.

Rajith Sebastian, head of ESG and Sustainable Investing for the $20 billion state fund, reported at a Reuters NEXT Newsmaker event in New York that this new allocation “immediately reduced our carbon exposure in the equity portfolio by something like 40%.”

The fund, which offers workers compensation and disability coverage, released a climate action plan in 2022 akin to those of larger public-sector pension funds in New York.

Sebastian mentioned that the insurance fund was starting behind its larger counterparts and initially sought “quick wins” by reorienting parts of its portfolio toward lower emissions goals.

To achieve this, it implemented strict criteria against any company or asset manager deriving more than 1% of revenue from coal mining, leading to a significant reduction in carbon exposure by around 40%.

This strategic move also enabled the fund to provide seed capital for the new ETF, the Calvert U.S. Large-Cap Core Responsible Index ETF. Sebastian acknowledged facing internal backlash, particularly concerns about excessive exposure for the fund.

Currently, state fund holdings constitute about half of its $354 million assets, a decrease from approximately 95% initially. “We didn’t even publicize because we thought, let’s do this, it’s impactful,” Sebastian remarked.