The world’s largest pension funds are adopting a total portfolio approach (TPA) in the face of an uncertain investment environment and interconnected risks, according to the Thinking Ahead Institute’s (TAI) latest Global Pension Assets Study.

Funds are increasingly shifting away from strategic asset allocation to enable greater flexibility and adaptability, said the TAI. They are turning to approaches “better suited” to handling interconnected risks that cut across asset classes, including inflation, liquidity, concentration, systemic and climate risks.

The report also said resilience was emerging as a key principle, referring both to the robustness needed by portfolios to withstand adverse conditions and the organisational capacity required to “anticipate, adapt and learn from emerging threats”. Growing uncertainty over climate, geopolitics and other systemic risks required a dual framing across schemes’ asset mix and their capability to navigate an increasingly volatile environment, it added.

Global pension assets rose by 9.6% year-on-year to reach a record US$68.3 trillion in 2025, due to a sustained recovery across global markets. Defined contribution schemes now account for 63% of all assets across the largest seven pensions markets globally, but they only represent a majority of assets in the US (90%) and Australia (72%).

The US remains the largest single pensions market, with Canada overtaking Japan in second following 12% year-on-year growth in 2025.

The institute said TPA had reached “a defining moment”, partly due to the size of the portfolios, citing its adoption by CalPERS, the largest public sector scheme in the US, as evidence the concept had entered the mainstream.

“This shift reflects a growing recognition that managing today’s portfolios requires whole-portfolio decisions rather than asset-class optimisation and organisational and portfolio resilience rather than managing volatility and tracking error risks.”

With TPA, asset performance is judged in terms of how the exposure contributes to overall objectives, rather than how it compares individually to its benchmark.

“TPA supports more coherent portfolio construction by clarifying the role of each exposure, the next unit of risk the fund is willing to take, and the trade-offs between private-market opportunity, liquidity and long-term resilience,” the report explained adding that its focus on integrated decision-making and improved data helped investors manage more effectively over time.

It noted that TPA enables faster and more coordinated decision-making, which is needed in an era of “rapid technological change and rising political and systemic risks”.

TAI said large pension funds were boosting resilience through use of tools and practices that help them to better understand how systemic risks interact and evolve, such as macro-foresight, horizon scanning and scenario analysis.

“As systemic risks become more interlinked and unpredictable, resilience hinges on building adaptive systems rather than relying solely on historical patterns or traditional risk measures,” it said.

“The 2026 outlook is likely to be shaped by policy decisions, technological innovation and shifting global dynamics. Fiscal support and AI-related investment should remain important growth drivers,” said TAI Director Jessica Gao.

Institutional investors worth £191 billion AUM have filed a shareholder resolution asking fossil fuel firm BP to demonstrate how increased upstream spending will deliver shareholder value.

A coalition of UK and European pension funds including Nest, London CIV, and the Greater Manchester Pension Fund co-filed the shareholder resolution alongside the Australasian Centre for Corporate Responsibility (ACCR). 

It seeks enhanced transparency of BP’s “disciplined approach” to capital expenditure for new oil and gas projects.

The ACCR-led filing means incoming CEO Meg O’Neill now faces two resolutions over the shareholder value of its strategic pivot toward fossil fuels and away from renewable energy investments. 

In January, Dutch campaign group Follow This co-filed resolutions for the 2026 AGMs of Shell and BP with 23 institutional investors requesting both companies disclose strategies for creating shareholder value under scenarios of declining oil and gas demand.

The filings follow the UK-listed firm’s 2025 strategic “reset” which increased upstream spending by 17% to approximately US$10.5 billion annually, contributing to a 75% allocation of total capital expenditure to oil and gas, up from 60% in previous years.

ACCR research found that BP’s total shareholder returns have lagged behind both the market and its peers over three, five, ten, and 15-year periods. Shareholders contend the firm’s pivot will not address the firm’s long-term under-performance, noting that conventional oil and gas investments over the last six years created only $0.9 billion in value from $22 billion in capital.

The resolution directs BP to disclose specific criteria used in its investment framework in time for its 2027 AGM, requesting detailed information on project cost-competitiveness, accounting for cost overruns and delays, and the value of exploration expenditure. 

“BP has underperformed for the past decade, including the period they were prioritising oil and gas production. Now they have dropped their renewables strategy, investors need to be reassured that any expansion to their upstream oil and gas portfolio will be governed by robust capital discipline and generate sustainable returns,” said Diandra Soobiah, Director of Responsible Investment at Nest.

At BP’s 2025 AGM, 24% of shareholders voted against the re-election of BP Chair Helge Lund – on grounds of a lack of consultation over weakened climate commitments.

Asset owners and managers increasingly view responsible investment as inherent to their fiduciary duty to clients and beneficiaries, according to an analysis of signatory reporting by the UN Principles for Responsible Investment (PRI).

Three quarters (74%) of signatories’ policies explicitly connect responsible investment activity to fiduciary duty, the PRI said, drawing on annual reporting from 4,327 signatories globally.

The PRI said the data shows a large majority of signatories are increasingly emphasising the financial materiality of sustainability and governance factors.

Financial materiality underpinned two thirds (67%) of signatories’ rationales when acting on sustainability outcomes, with present and future regulatory risk cited by just under half (49%).

As well as outlining fiduciary duty and legal obligations, submitted senior leader statements increasingly referenced with due diligence and value creation. Climate change was the most cited risk.

The report also found that 43% of signatories used key performance indicators relating to responsible investment to evaluate executives, up from 40% last year.

A separate analysis of the climate policies of 200 institutional investors reported that 75% were assessing the financial risks and opportunities that climate poses for their portfolios, with a similar proportion implementing board-level oversight of climate-related strategies.

The ‘Global State of Investor Climate Action report’ – released by the founding partners of the Investor Agenda, including the PRI, ahead of COP30 in November – identified a growing appetite to engage with policymakers as well as portfolio companies as part of climate stewardship strategies.

According to the survey, 73% of investors are engaging investee companies on climate issues, with 64% using escalation mechanisms, and 57% integrating climate-related risk into proxy voting.

With engagement increasingly viewed as the main lever available for decarbonising the real economy, 43% of investors said they were engaging with governments on climate change.

The PRI recently launched guidance for asset owners and managers on addressing financially material system-level risks such as climate change to protect long-term portfolio value.

The guide outlines a three-step framework – identifying outcomes and developing strategy, taking actions, and monitoring, assessment and reporting – for investors to adapt to their own circumstances.

It highlights potential approaches to system-level stewardship approaches, including engagement with policymakers and regulators, as well as engagement with parties across the investment chain, such as asset managers, service providers and beneficiaries.

Montreal-based pension fund La Caisse’s latest climate strategy has been recognised with the first grade in the A range awarded by NGO Shift, in its fourth annual ranking of Canada’s pension funds.

Formerly known as Caisse de dépôt et placement du Québec, La Caisse was handed an A- for its 2025-2030 plan, which will direct C$400 billion toward climate action – covering investments in climate solutions and decarbonisation.

The strategy will switch La Caisse’s focus from its portfolio carbon footprint to the decarbonisation pathways and ‘climate maturity’ of portfolio companies, in recognition that the funds’ portfolio was decarbonising faster than the real economy.

Shift also commended La Caisse’s use of the ‘do no significant harm’ principle to prevent investments from “unintentionally locking-in high-emission activities, undermining decarbonisation goals or causing significant harm to other environmental and social objectives”.

Overall, the scorecard reflected a widening performance range across the 11 funds analysed, with only one other scheme – the Ontario Municipal Employees Retirement System – improving its grade over the past 12 months.

Downgraded pension providers included the Canada Pension Plan Investment Board (CPPIB), following its decision last year to pull back from an existing net zero target.

Shift blamed a ‘greenhushing’ trend for the static rankings of the Ontario Teachers’ Pension Plan – which hasn’t updated its climate strategy in over three years – as well as British Columbia Investment Management Corporation and Public Sector Pension Investment Board, which have no emissions reduction or climate investment targets beyond 2025 and 2026, respectively.

“The gap between climate leaders and backsliders is no longer a matter of nuance. It’s widened to reveal a fundamental split in how pension managers view their duty to their members,” said Laura McGrath, Senior Manager at Shift.

A separate analysis by Reclaim Finance found that most institutional investors’ climate targets were inadequate – in terms of quality and scope – for delivering a comprehensive decarbonsation strategy.

The Paris-based campaign group analysed the emissions, alignment, engagement, and climate solutions investment targets of more than 80 global investors, reporting “major shortcomings” that would undermine impact, despite “some progress”.

Reclaim Finance said investors should take a more standardised, simpler and transparent approach to target-setting to accelerate real-economy decarbonisation.

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.