Pension funds’ progress on climate goals could be further accelerated by a “supportive operating environment” that equips asset owners and managers to decarbonise their portfolios, according to the Climate Policy Initiative (CPI).
Using CPI’s Net Zero Tracker Tool, the think tank’s new report showed a rise in the share of pension assets in developed countries subject to at least one climate target, from 9% in 2020 to 63% in 2024.
But schemes’ existing exposures remain misaligned with net zero scenarios, with 55% of equity and bond energy holdings still supporting companies expanding fossil fuels.
The report assessed the climate transition progress of 594 pension funds across member countries of the Organisation for Economic Co-operation and Development (OECD), representing US$22.5 trillion in assets under management or owned.
The report said the relationship between asset owners and managers was a “critical lever for change”, noting the role of mandate structure, performance assessment and stewardship governance in translating climate commitments into real-world impact.
To win and retain mandates, CPI said asset managers should focus on designing climate-aligned investment solutions which acknowledge trade-offs and restraints on action. They should also be prepared to customise their approach more closely to client requirements.
The report also proposed that asset managers regard stewardship as a “strategic differentiator”, including by partnering with asset owners on the co-design of stewardship priorities and escalation strategies.
A number of asset managers have lost mandates from pension funds in 2025 arising from concerns over the quality of climate-related stewardship capabilities, with Dutch pension provider PME recently withdrawing US$5.9 billion mandate from BlackRock.
According to CPI’s analysis, pension schemes from jurisdictions with robust climate disclosure rules and climate guidance within fiduciary duty typically had the strongest climate targets and implementation records.
In addition to delivering an investable and climate-aligned economy, the CPI said policymakers could provide an enabling environment for pension funds and other asset owners by building a supporting governance, standards and stewardship architecture.
Specific actions included the development of asset owner-specific climate transition frameworks and stewardship codes, regulatory clarity around collaborative engagement and standardised data and templates for delegated capital disclosures, stewardship reporting and vote reporting.
