ESG Investing

Regional Spotlight: Impact Investing in New York City Addresses Major ESG Issues

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Still arguably the world’s cultural, financial, and business capital, New York City may also claim the ESG capital crown thanks to its position at the vanguard of just about every movement within the impact investing arena. This opens nearly endless opportunities for impact investing in New York City among nearly every aspect of ESG.

Nevertheless, the Big Apple has its own particular ESG concerns as issues including climate change, a lack of racial justice, and poverty continue to challenge progress.

Approaching Climate Change and Flooding

Situated across multiple islands and girded by several major rivers, not to mention the Atlantic Ocean, New York City is particularly susceptible to the flooding dangers caused by climate change, as Hurricane Sandy demonstrated in 2012. This is exacerbated further by “pluvial rainfall”—heavy rain falling on impervious surfaces like concrete that rushes downhill rather than sinking into the ground.

Since Sandy, NYC has been proactive about installing more permeable architecture, such as green roofs and rain gardens, as well as upgrading pumps and drainage pipes. For example, NYC recently implemented its most tactical approach to flooding with the East Side Coastal Resiliency Project. Targeting Manhattan’s East Side, it seeks to incorporate flood protection with the existing community through improved access to open waterfront spaces as opposed to walling off the neighborhood. Construction is expected to continue through 2026.

Infrastructure improvements are only one part of a potential solution, however; climate change and flooding also highlight social and legal issues. For example, floods are more likely to impact vulnerable people, a fact attested to by 11 people killed in NYC from Hurricane Ida in 2021, who were living in cheaper—and mostly illegally converted—basement apartments.

Tackling flooding is imperative in the here and now, but it still only deals with the symptom of the problem: climate change.

Addressing Climate Change through Law

Tackling flooding is imperative in the here and now, but it still only deals with the symptom of the problem: climate change. With building operations accounting for more than 70% of the city’s greenhouse gas pollution, NYC recently implemented a law aimed at minimizing the use of natural gas and other carbon-based fuels in the construction of new buildings beginning in 2024. Although the law does not explicitly ban the use of natural gas or specify what kind of power to use, it does cap emissions to a level that would be nearly impossible to meet using natural gas.

Introducing Pension Funds as ESG Investors

Three of the city’s five pension funds have also gotten involved in impact investing in New York City, recently announcing an agreement to double investments in ESG-related solutions to more than $8 billion by 2025, to $37 billion by 2035, and to ultimately achieve net-zero greenhouse gas emissions in their investment portfolios by 2040.

Highlighting NYC Racial Inequities in the Pandemic

Racial justice and poverty issues in NYC are intricately intertwined with other concerns. For example, the impact of the COVID-19 pandemic was particularly skewed in favor of the more privileged. According to a February 2021 report, Black and Latino New Yorkers were more likely to have lost their jobs and three times more likely to have experienced food hardship than white residents. The report did find that, alongside other interventions, government programs such as the CARES Act helped to soften the blow to such New Yorkers. Nevertheless, much more work remains to be done toward closing these gaps.

Recognizing the NYC ESG Community

A robust NYC ESG community helped shape the response to these challenges and more. Indeed, many of those aforementioned “other interventions” helping in the wake of COVID stemmed from community foundations and other organizations in NYC. For example:

  • The New York Community Trust issued $265 million in grants in 2020 alone to vital nonprofits dedicated to improving the lives of NYC residents. Grants go toward providing healthy food to those in need, improving housing and services for the homeless, helping job seekers obtain the skills employers want, and more.
  • Long Island Community Foundation—a division of the New York Community Trust—works with area nonprofits to address complex challenges such as homelessness, childhood development, and criminal justice reform through a mix of advocacy, innovation, leadership, and research.
  • The Stonewall Community Foundation supports the LGBTQ community in many areas, from education and equity to LGBTQ housing and homelessness. Nearly a third of Stonewall’s grants benefit programs serving youth.

The NYC area suffers from many of the same ESG issues prominent in other large cities such as Cleveland and Chicago—climate change, flooding, and racial injustice and poverty included. Fortunately, few cities have as many organizations, foundations, and people committed to impact investing as New York City, offering investors ample opportunities in every area of ESG to make an impact.

Any company, security, fund or other investment identified herein is provided solely for illustrative purposes and should not be construed as a recommendation or solicitation for the purchase or sale of any such investment. By clicking on a weblink included in the above article, you may access a website operated by a third-party. Please review the website’s terms of use and privacy policy upon entering the site. We are not responsible for any content, links, products or services available on third-party websites.

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