Do the right thing: NYC Comptroller CIO on climate returns and manager accountability

The Bureau of Asset Management, which oversees more than $306bn in investment assets for the five New York City public pension systems, has undergone significant leadership changes. Mark Levine took over as comptroller at the beginning of this year, followed shortly by Monte Tarbox, who initially stepped in as interim CIO before being appointed permanent CIO last month.

Tarbox brings more than 30 years of investment industry experience, having previously led investment teams for the National Electrical Benefit Pension Fund and the International Association of Machinists. Most recently, he served as president of AFL-CIO Building Investment Trust, a collective fund managing a real estate portfolio on behalf of pension fund investors.

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New challenges

His new role at the Bureau of Asset Management comes with unique challenges. Decision-making across the five funds is complex, with 77 trustees overseeing investment processes across the different systems, often holding vastly different political opinions, he acknowledges.

Despite this added complexity, Tarbox is a firm believer in the trustee model.

“Committees do make better decisions than a single individual decision-maker,” he says.

“Although they’re not investment professionals or finance wizards, all the trustees I’ve ever worked with have a ton of business sense and more than their fair share of common sense.”

“They have dramatically different opinions when it comes to everything from diversity to ESG to where you find alpha in investment markets.”

“Nine times out of 10, I’ve seen pension fund trustees say, ‘We’ll only go forward with a recommendation if everybody understands it and everybody agrees.’”

His appointment comes at a crucial time for the systems, which, unlike many of their peers in Europe and the UK, continue to report funding deficits. On average, the systems are just over 80% funded. At the same time, comptroller Levine announced in January that New York City is projected to face a $2.2bn budget shortfall in 2026, potentially rising to more than $10bn in fiscal year 2027.

While newly elected mayor Zohran Mamdani has pledged to tackle the deficit, delivering strong investment returns will remain vital for the investment office.

Fortunately, the systems benefit from a solid performance track record. Over the past year, they delivered returns of 10.3% as of June 2025. Over a five-year period, returns reached 8.5%, driven in part by a significant allocation to equities.

Climate returns

The systems have previously faced criticism over their commitment to tackling climate change. In May 2023, the funds were sued by conservative groups and plan participants over their 2021 decision to divest roughly $4bn from fossil fuel assets. Plaintiffs alleged the funds had failed to prioritise financial returns over climate considerations. The case was ultimately dismissed in 2024.

Like his predecessors, Tarbox is keen to point to the performance figures.

“Since the time that we’ve gone through that divestment exercise, we’ve not only not seen a deterioration in returns, but we’ve seen improvements,” he says.

At the heart of the debate is a common misconception, he argues.

“People who come to the conversation for the first time assume there’s a trade-off — that to do the right thing, you have to compromise on economics or financial returns.”

“Our experience has been quite the contrary: you can do both.”

Divesting from fossil fuels has significantly reduced the systems’ carbon footprint. In April, Levine announced that the systems’ carbon footprint had been cut in half, putting the funds well ahead of their interim 2040 net-zero targets, according to the latest Climate Progress Report.

Tarbox acknowledges, however, that future progress will be more difficult.

“Eventually, the easy solutions and quick fixes are exhausted, and you’re left with the hard cases.”

Those harder cases include reviewing mandates with external managers, tackling Scope 3 emissions, assessing hard-to-abate sectors and understanding the impact of AI.

Mandates on the line

One issue dominating headlines in recent months has been former comptroller Brad Lander’s review of the systems’ external managers based on climate alignment.

Over more than a year, the Bureau of Asset Management engaged external managers on climate alignment, prompting Lander to recommend divestments from BlackRock, Fidelity and Panagora.

Recommendations to divest from Fidelity and Panagora were later dropped after the managers agreed to strengthen their engagement efforts. A decision on BlackRock remains outstanding.

BlackRock, the world’s largest asset manager, currently oversees $42.3bn in US public equity index mandates for NYCERS, TRS and BERS.

Lander criticised BlackRock over its decision to stop proactive voting engagement with companies in which it owns more than 5% of shares. As one of the world’s largest equity investors, BlackRock holds stakes above that threshold in many major companies, including oil giants such as ExxonMobil, Chevron and Marathon Oil.

BlackRock argued the move was necessary to comply with changes in SEC reporting requirements under the Trump administration. Lander countered that other major asset managers, including State Street, had maintained a more robust engagement approach.

If the New York systems chose to divest, it would represent one of the largest climate-related manager overhauls by an asset owner to date, following moves by institutions including The People’s Pension in the UK, Denmark’s AkademikerPension and Dutch pension funds PME and PGGM.

Still, Tarbox stresses that any decision is far from straightforward.

“BlackRock is a really important part of our investment programme right now,” he says. “We are a bit disappointed with how BlackRock has responded to changes in regulation and federal government policy. We would have hoped they could have stayed the course and stood their ground.”

Tarbox notes that increasing competition among index managers has made replacement decisions easier than in the past. “There are lots of good index fund providers. It’s an extremely competitive industry, and costs have come down radically over the course of my career,” he says. “They’re getting down to basis points. The economics of indexing have been very favourable to pension plans.”

Yet he argues the issue extends beyond simply changing providers. “Merely cutting our ties with BlackRock is not going to solve any problems, and that’s where engagement with the corporate sector comes in,” he says. “We have very high standards for what we expect.”

With more than $40bn at stake, the team is carefully evaluating whether alternative managers can genuinely offer more credible solutions. “For us to make a change, we’d have to have greater confidence in the other providers, and we’re still exploring that.” 

Whatever the outcome, Tarbox insists the systems are not lowering their expectations. “We have not relaxed or compromised our expectations of our investment managers with respect to climate solutions and, in particular, their net-zero commitments,” he says. “Manager alignment is as critical to us today as it has been at any point in the last 10 years. But in some respects, it’s gotten a lot harder to effectuate.”

Data centres and AI

Beyond manager alignment, the systems are also grappling with the implications of AI and its impact on the energy transition.

According to the systems’ latest climate strategy, the investment office is increasingly concerned about the growing carbon footprint of major technology companies such as Microsoft, Apple and Alphabet.

“There’s a tension there, almost a paradox, that the technology we need to come up with innovative ideas comes at the expense of huge energy consumption,” Tarbox says.

Still, he remains optimistic that technological advances will improve efficiency over time. “If we let technology do its thing, over time companies can iterate and come up with more effective, more optimal solutions,” he says. “I think some of the deleterious effects of data centres that we are grappling with today will moderate over time as the technology changes.”

In this case, divestment is not a realistic option, he argues. “We can’t avoid the fact that they’re a critical component in the overall transition of the economy.”

Over the coming months, the investment committees for the five systems will continue meeting, with advancing the net-zero agenda remaining a central challenge. Despite growing political pushback against net zero at the national level, Tarbox remains confident that opportunities tied to the global energy transition will continue to emerge.

“You just have to work harder, you’ve got to be smarter, you’ve got to dig deeper, and you’ve got to be in it for the long game.”

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