New York State Fund Exchanges Coal Assets for Responsible Index ETF, According to Reuters

By Ross Kerber and Isla Binnie

Moving investments away from coal assets to a new responsible investment exchange-traded fund (ETF) was a strategic decision that the New York State Insurance Fund sought to implement while assessing the climate and social impact of its investment portfolio, according to a key executive.

Rajith Sebastian, who leads ESG (Environmental, Social, and Governance) and Sustainable Investing for the $20 billion fund, noted that this allocation led to a significant reduction in carbon exposure within their equity portfolio by approximately 40%. He spoke about this shift at a recent event in New York.

The insurance fund provides various types of coverage, including workers’ compensation and disability insurance. In 2022, it developed a climate action plan similar to those of larger public-sector pension funds in New York.

Initially, the insurance fund aimed to catch up with its larger counterparts, and Sebastian mentioned that they were focused on achieving "quick wins" by reallocating portions of their portfolio to align with emissions reduction goals. One of the key strategies involved implementing strict criteria that excluded any company or asset manager deriving more than 1% of its revenue from coal mining.

This decision not only led to the aforementioned decrease in carbon exposure but also enabled the fund to invest in the Calvert U.S. Large-Cap Core Responsible Index ETF. Despite facing initial internal concerns about potential overexposure, particularly regarding the new ETF, Sebastian indicated that this strategy has paid off.

Currently, the fund’s holdings represent about half of its assets, valued at approximately $354 million, a significant decrease from around 95% previously. "We kept this low profile because we wanted to make an impact without attracting too much attention," Sebastian explained.