New York State fund swapped coal assets for responsible index ETF

By Ross Kerber and Isla Binnie

(Reuters) – Moving money from coal assets to a new responsible-investment exchange-traded vehicle provided the sort of quick win the New York State Insurance Fund was looking for when evaluating the climate and social impacts of its holdings, a top executive said on Thursday.

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

Sebastian’s fund provides workers compensation, disability and other coverage, and in 2022 released a climate action like those set out by New York’s larger public-sector pension funds.

The insurance fund was starting later than those bigger peers and Sebastian said it initially was looking for “quick wins” by shifting parts of its portfolio toward goals like reducing emissions.

One step, he said, was to impose stringent screens against any company or asset manager that received more than 1% of its revenue from coal mining, which immediately reduced carbon exposure in its equity portfolio by about 40%.

The move also allowed the fund to provide seed money for a new ETF, the Calvert U.S. Large-Cap Core Responsible Index ETF. “We got a lot of backlash internally,” Sebastian said, citing initial concerns about creating too much exposure to the fund.

The state fund’s holdings now account for about half its assets of about $354 million, down from around 95% initially, Sebastian said. “We didn’t even publicize because we thought, let’s do this, it’s impactful.”