Net zero in NYC
Two US public pensions just took a major step as part of private equity’s move towards decarbonisation. New York City Comptroller Brad Lander unveiled plans last Wednesday to divest the New York City Employees’ Retirement System and the Teachers Retirement System from any upstream fossil fuel investments, per a statement. The pensions will ask private markets managers to exclude such assets and, if “thorough engagement proves to be futile” with managers or companies whose core business undermines climate goals, the systems will consider excluding them.

“Adopted by trustees today, the Net Zero Implementation Plans are a tangible, measurable roadmap toward decarbonisation across our investment portfolio and the global economy,” said Lander in the statement. “NYCERS’ and TRS’ plans will prudently address climate risks and maximise opportunities to benefit New York City pensioners and beneficiaries, consistent with our fiduciary duty. This ‘high ambition’ plan is also a call for partnership with other pension funds, asset managers, financial firms and portfolio companies. The climate crisis cannot be effectively addressed in silos.”

The move comes as part of a 2021 plan for NYC’s public pensions to reach net-zero emissions in their investment portfolios by 2040 and to invest $50 billion in climate solutions across all five NYC pension funds by 2035. From 2017 through 2022, NYCRS and TRS have been actively divesting fossil fuel reserve owners in their public equities portfolio and doubled climate investments.

This decision is a significant one for an asset class that remains somewhat divided over how best to tackle the climate crisis. Many in private markets are committed to reducing their exposure to fossil fuel-related investments or targeting net-zero carbon emissions. However, speaking in 2020, Chris Ailman, CIO at the California State Teachers’ Retirement System, noted that divesting from fossil fuels is unlikely to bring about the social changes activists are campaigning for. What’s more, divestment is no easy feat. Maine Public Employees Retirement System, for example, is among those exploring ways to cut its fossil fuel exposure; as Side Letter noted in January, however, doing so could be a complicated, and costly, process.

Though it’s not entirely clear whether NYC’s move would involve active divestment on the secondaries market or simply screening any future investments in this space, its emphasis on engaging with existing managers and potentially excluding those who don’t respond to these efforts seems to sit somewhere between both schools of thought.

Ex-Mercury (exec) rises
Investment banks around the world have been rushing to build up their secondaries advisory capabilities as GPs run continuation processes on their assets – a move that some have termed the ‘fourth exit route’ after IPOs, secondary buyouts and trade sales. DC Advisory, the advisory unit of Japanese financial services conglomerate Daiwa Securities Group, has been adding professionals over the past eight months and has just hired Mercury Capital Advisors’ former head of secondaries, Sabina Sammartino. Our colleagues at Secondaries Investor have the details (registration required).

Sammartino will work with former Elm Capital and Jasmin Capital secondaries intermediaries in its GP Secondaries team, suggesting the unit will be focusing on sponsor-initiated processes. William Blair and Baird have added personnel over the last six months, while Campbell Lutyens launched a tie-up with JPMorgan for strategic collaboration on continuation funds last month.

They did the math