Millions of American workers depend on public pension funds for a secure retirement. But too many of these pension funds are ignoring the growing economic risks posed by climate change, and failing to safeguard workers’ financial future.
The latest report from the Sierra Club and Stand.earth, The Hidden Risk in State Pensions, finds that while some pension funds are taking responsible steps to address these risks, far too many are falling behind and putting workers’ savings and public resources at greater risk.
Climate-driven disasters are already taking a massive toll on the global economy. Hurricane Helene alone is expected to cost insurers $6.4 billion, with broader economic impacts reaching $250 billion. The recent Los Angeles fires are estimated to exceed $250 billion, sparking debate about who pays for increasingly catastrophic climate disasters. A recent study found that between 2000 and 2019, climate-related extreme weather damages inflicted a staggering $16 million an hour in economic losses.
These impacts threaten every sector of the economy, yet many pension funds are failing to use one of their most powerful tools — proxy voting — to push companies to address the financial risks of climate change.
Voting For Our Future
As major shareholders in corporations, pension funds have the ability to engage with and influence corporate decision-making by voting on corporate boards and shareholder resolutions at companies’ annual general meetings.
The report evaluated 32 of the largest and most influential public pension funds in the United States, collectively representing over $3.8 trillion in assets. It found that while some pensions have strengthened their proxy voting guidelines, many still lack adequate guidelines that would enable them to vote for beneficial climate- and environment-related proposals at companies’ annual meetings.
The scorecard reveals that Massachusetts Pension Reserves Investment Management (MassPRIM) led the pack, earning the only "A" grade. Other top performers included California Public Employees’ Retirement System (CalPERS), the University of California Investment Office, the Connecticut Retirement Plans and Trust Funds (CRPTF), New York City Public Pension Funds, and Oregon Public Employees Retirement System (PERS). These funds have adopted proxy voting guidelines that largely allow them to hold corporations accountable on climate change.
On the other end of the spectrum, the scorecard reveals that eight pension funds in states with “anti-ESG” laws or executive actions — such as Florida, Texas, and Virginia — scored significantly lower than their peers. And even in states without such restrictions, several pension funds had only minimally better guidelines in place, all of which fail to reflect the urgency of the climate crisis. By withholding support for key climate disclosures and policies, these two groups of pensions limit the overall potential of shareholder engagement.
Why This Matters for Workers and Retirees
Pensions have a fiduciary duty to act in the best interests of their beneficiaries. Ignoring climate risk is a direct failure of that duty. As climate-related economic shocks become more frequent, pensions will face long-term financial instability.
Companies that fail to adapt will lose value, jeopardizing the returns that retirees depend on — but more importantly, much of the economy that relies on a healthy planet and workforce will suffer losses. Studies estimate that on our current warming trajectory, the global economy will suffer a nearly 20% hit in the next 25 years, with a 50% loss in GDP between 2070 and 2090 – when today’s newest workers will be retiring.
Our latest report makes it clear: Pensions have immense power to drive corporate action on climate change, but many are failing to use it. Retirees, workers, and taxpayers deserve better.
Public pension trustees and public financial officers must recognize that investing in a sustainable future is not only the right thing to do — it is a financial imperative.
The time for half-measures is over. Public pension funds must act decisively to align their investment strategies with the reality of climate risk.