New York City’s pension funds, which manage nearly $300 billion, are worried that major asset managers BlackRock and Fidelity Investments are not meeting their net zero commitments. This could lead to reviews or changes to their mandates. The funds are tightening their rules on climate-linked investments as part of their long-term plan to reduce carbon emissions.

This warning comes from the Fiscal Year 2025 Annual Climate Reports released by the New York City Comptroller’s Office. This office serves as an investment advisor and custodian. The funds stated that failing to meet climate expectations might result in re-bidding or ending mandates, which could affect previously identified allocations worth tens of billions.

Net Zero Targets Push for Stricter Rules

This action reflects a wider shift in governance after adopting a Net Zero Implementation Plan in 2022. The plan commits the pension system to fully reduce its portfolio's carbon emissions by 2040. It includes interim goals and stricter accountability for external managers. Asset managers must submit credible net zero strategies by 2025 or risk losing their mandates.

Earlier suggestions from former Comptroller Brad Lander had already raised concerns about alignment issues with key managers like BlackRock, Fidelity, and PanAgora. The focus was on whether these firms had made enough progress in their decarbonization planning and stewardship practices.

Lander also pointed out shifting expectations from regulators, particularly from the U.S. Securities and Exchange Commission. He noted that changes in disclosure and reporting requirements may have led some asset managers to take more cautious approaches regarding proxy voting and corporate engagement on climate matters.

Mixed Progress Among Asset Managers

The latest evaluation reveals inconsistent alignment among the pension system’s external managers. While PanAgora has improved its climate strategy and now meets expectations, BlackRock and Fidelity are still below the necessary standard. This classification puts both firms at risk of formal reviews.

For institutional investors, this shift signals a move from engagement-based methods to stricter enforcement. Meeting climate goals is increasingly seen as a requirement tied to decisions about capital allocation, rather than a voluntary guideline.

BlackRock previously responded to criticism by describing these actions as politicizing pension fund management. They warned this could harm long-term retirement security. However, the latest stance from the pension funds highlights a growing focus on measurable climate performance as part of their responsibility.

Significant Emissions Reductions and Financial Returns

Despite concerns about external managers, the pension system reported strong internal progress in cutting its financed emissions. Since 2019, the funds have reduced their greenhouse gas output by over 48% on a weighted average basis across Scope 1 and Scope 2 emissions.

Individual systems saw meaningful decreases in emissions intensity. The Teachers’ Retirement System achieved a drop of about 49%, while the New York City Employees’ Retirement System and the Board of Education Retirement System reported reductions of 46.68% and 45.72%, respectively. Each exceeded its interim 2025 targets, which varied between 22% and 32%.

Financial performance has stayed strong alongside these environmental achievements. The pension system delivered a 10.3% net return in 2025, showing that it is possible to cut emissions without hurting investment outcomes.

Increasing Pressure on Global Asset Managers

NYC Comptroller Mark Levine emphasized the dual goal of protecting retirees' assets while pushing for a low-carbon economy. He stressed the need to lower emissions exposure, increase investments in clean energy, and ensure accountability among portfolio companies.

The stance of the NYC pension funds has implications beyond the United States. As one of the largest public pension systems in the world, its decisions can influence capital flows and set examples for other institutional investors.

Asset managers globally are under growing pressure to show credible transition plans, achieve measurable emissions reductions, and improve their stewardship practices. Meeting climate goals is quickly becoming essential to investment mandates, fee structures, and long-term relationships with clients.

Climate Performance as a Key Responsibility

The actions of the NYC pension system indicate a larger change in how institutional capital is managed. Climate considerations are no longer an afterthought; they are now part of the main investment frameworks and responsibilities.

As regulatory scrutiny increases and asset owners sharpen their expectations, asset managers who do not adjust may risk losing access to significant amounts of capital. The balance between financial returns and climate goals is increasingly being tested in real time, with real consequences for global financial markets.