New York state insurance fund swaps coal assets for Responsible Index ETF

Moving money from coal assets into a new exchange-traded vehicle with responsible investments provided the kind of quick win the New York State Insurance Fund was looking for when assessing the climate and social impact of its holdings, a an executive director said Thursday.

The new allocation “immediately reduced our carbon exposure in the equity portfolio by about 40 percent,” Rajith Sebastian, head of ESG and Sustainable Investments for the $20 billion sovereign wealth fund, told a Reuters NEXT Newsmaker event in New York .

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

The hedge fund was starting later than its larger peers and Sebastian said it was initially looking for “quick wins” by shifting parts of its portfolio to goals such as reducing emissions.

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

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

The sovereign wealth fund’s holdings now make up about half of its roughly $354 million in assets, down from about 95 percent initially, Sebastian said. “We didn’t even advertise because we thought, let’s do this, it’s impactful.”

(Reporting by Ross Kerber in Boston and Isla Binnie in New York; Editing by Richard Chang)

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