Most US public pension funds are missing out on opportunities to allocate to climate solutions, with the majority not yet developing policies for directing capital to investments that reduce CO2 emissions.
A study of 30 funds worth US$3.25 trillion AUM by environmental non-profit Sierra Club scored four as having a ‘strong’ climate solutions investment strategy: Minnesota State Board of Investment, New York City funds overseen by the City Comptroller, the New York State Common Retirement Fund, and the Oregon Public Employees Retirement Fund.
The California State Teachers’ Retirement System (CalSTRS), the second largest public pension system in the country, was one of four ranked as having a weak policy. Four others were categorised as ‘developing’ with the rest having no policy in place around climate-positive investments.
Sierra Club awarded the ‘developing’ score to funds for lacking time-bound, numeric targets, limiting their strategy to certain asset classes, or failing to prioritise real-economy decarbonisation
California Public Employees’ Retirement System (CalPERS), the US’s largest public pension system, was among those listed as ‘developing’ for climate solutions, despite having a ‘strong’ score for its net zero commitment.
Sierra Club said this was because CalPERS’ policy focuses on achieving a 50% reduction in portfolio emissions intensity by 2030, “which does not necessarily drive real-world emissions reductions”.
The NGO said its analysis found that most pensions lack clear targets, credible definitions, or transparent disclosures showing how their investments help finance low-carbon and resilient infrastructure and reduce climate-related financial risks.
It also said that most climate solutions investment policies were too narrowly focused on clean energy, with few if any addressing other areas crucial to climate risk mitigation, such as nature and biodiversity, just transition, and climate resilience.
Jessye Waxman, Sustainable Finance Campaign Advisor at the Sierra Club, said most US public pensions still rely on high-level commitments or inadequate metrics that do little to drive emissions reductions or protect retirement security.
“Mitigating the systemic risk of climate change requires rapid decarbonisation and building the resilient, low-carbon infrastructure needed for sustainable economic growth and stability. Public pensions are well positioned to support and benefit from these efforts” she added.
The study also found that 24 of the 30 funds had “no discernible” net zero commitment.
