Economists say city’s status as financial and cultural giant means move to sever ties with fossil fuel will catalyze others in US and around the world to follow.

The Manhattan and Brooklyn Bridges in 2012, as the effects of Hurricane Sandy were felt.
The Manhattan and Brooklyn Bridges in 2012, as the effects of Hurricane Sandy were felt. Photograph: KeystoneUSA-Zuma/Rex Features

New York City’s decision to sever ties with its fossil fuel investments is set to prove a catalyst to other cities in the face of the Trump administration’s staunch support for coal, oil and gas interests, according to several leading economists.

On Wednesday, city officials announced that New York was to divest its pension funds of about $5bn in fossil fuel-linked money over the next five years. New York’s total pension fund for its teachers, firefighters and other city workers is worth about $189bn.

Bill de Blasio, New York’s mayor, also revealed the city is suing the world’s largest oil and gas companies over their role in knowingly creating dangerous global warming in a two-pronged assault that he said is aimed at “standing up for future generations”.

Economists said the status of New York as a financial and cultural giant would probably spur other cities in the US and worldwide to divest and, more significantly, build momentum in the global shift required to reduce emissions and stave off the worst consequences of climate change.

“This is a really big deal,” said Jeffrey Sachs, an economist at New York’s Columbia University and special adviser to the UN secretary general. “Pension funds of other major US cities will follow, I think. New York is the neighborhood of the very big money managers. It’s a powerful, personal signal to them that they cannot keep funding the sorts of projects they have in the past.”

New York will be the first of the US’s largest cities to divest and has jostled to the forefront of a group of global metropolises that have committed to ridding themselves of fossil fuel stocks, including Paris, Berlin, Sydney and Stockholm.

In November, the Norwegian central bank, which runs the world’s largest sovereign wealth fund, proposed dumping shares in oil and gas companies. Dozens of other institutions, ranging from Oxford University to the Rockefeller Brothers Fund, have also joined a movement that activists say is worth $6tn in divestments or avoided investment.