A new update from the New York City Comptroller’s office has intensified scrutiny on how the nation’s largest asset managers address climate risk. The office released the latest Net Zero Implementation Plan covering three of the city’s major retirement systems, and the findings have triggered a strong response. After reviewing climate submissions from dozens of firms, the Comptroller is urging the pension boards to reconsider mandates with BlackRock, Fidelity and PanAgora, arguing that their decarbonisation plans fall short of what the funds require for long-term climate alignment. The development raises an important question for the investment world: how should public pension systems respond when their external managers fail to meet the standards they set for Paris-aligned financial stewardship?

A Growing Divide Between Pension Expectations and Asset Manager Action

According to the Comptroller’s office, forty six out of forty nine public market asset managers submitted climate strategies that aligned with the pension funds’ net zero framework. The three exceptions were BlackRock, Fidelity and PanAgora. Their lack of compliance stands in contrast to the substantial progress already made by the funds, which have recorded a thirty seven percent reduction in financed emissions since 2019 and allocated nearly twelve billion dollars toward climate solution investments. The funds had set a mid 2025 deadline requiring all public equity and corporate bond managers to submit decarbonisation plans. Once the submissions were evaluated, it became clear that a handful of managers had not met the expected level of detail, ambition or alignment with science based pathways. Comptroller Brad Lander stressed that the city cannot rely on managers who treat climate risk as a secondary concern, noting that these gaps undermine the core goals of the pension systems’ investment strategy.

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Why the Plans Fell Short: Limited Engagement and Regulatory Headwinds

Part of the shortfall stems from the asset managers’ withdrawal from climate engagement following updated SEC rules. These rules restricted how managers could influence portfolio companies on environmental matters, which in turn altered how some firms approach climate advocacy. PanAgora, for example, focused primarily on emissions reporting rather than on persuading companies to adopt net zero targets or credible transition strategies. The Comptroller argued that disclosure is only one element of climate risk management and cannot replace active engagement with high emitters. BlackRock and Fidelity, despite their scale and influence, were also judged to have provided insufficient alignment with the pension funds’ net zero expectations. Their filings lacked the policy strength and implementation detail required for long-term climate resilience. Based on these findings, the Comptroller is recommending that BlackRock’s forty two billion dollar mandate be opened for rebid, while the mandates with Fidelity and PanAgora be terminated entirely.

Reinforcing Engagement With High-Emitting Sectors

A significant portion of the update emphasises the importance of targeted engagement with companies that produce the greatest share of financed emissions. The Comptroller’s team has already worked directly with more than one hundred companies, particularly utilities, to push for science based targets and verifiable transition plans. However, concerns remain regarding the robustness of certain frameworks. Tools such as SMARTargets may, in some cases, overstate progress or allow companies to present partial compliance as full alignment, raising fears of greenwashing. The report stresses the need for improved tools and methodologies that can help investors distinguish between genuine decarbonisation and cosmetic reporting. Strengthening this capability is central to ensuring that pension funds can manage long-term climate risk responsibly.

Expanding Fossil Fuel Restrictions to Protect Future Portfolios

Beyond engagement with portfolio companies, the Comptroller is urging pension boards to tighten restrictions on fossil fuel exposure. Current policies already limit certain upstream investments, but the new recommendation calls for a broader prohibition on future investments in midstream and downstream assets. This would include pipelines, LNG terminals and associated transport infrastructure, all of which carry significant transition risk as global energy systems shift toward lower-emission alternatives. The rationale is clear. Investments linked to long-lived fossil fuel infrastructure could become stranded assets as climate policies strengthen, technology costs decline and investor preferences shift. Avoiding additional exposure now is seen as a way to safeguard pensioners’ long-term financial interests.

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A Strategic Shift Toward Climate Resilience in Public Investment

The conclusions of the Net Zero Implementation Plan point toward a larger strategic transformation in how public pension systems view climate responsibility. The goal is not solely to divest or penalise underperforming asset managers. Rather, the aim is to ensure that all parts of the investment chain actively support financial stability, lower exposure to climate-driven risk and uphold global commitments such as the Paris Agreement. The Comptroller framed the recommendation succinctly. Managing climate risk is not optional for long-term investors. It is central to protecting retirement security for millions of workers who rely on these funds. As the pension boards take up the recommendations, the decisions they make in the coming months could influence broader market expectations for climate alignment across the asset management industry.

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