The Sierra Club’s latest report analyzes how public pensions across the country are managing climate-related risks through their investment strategy, with a focus on whether they are steering investments into credible climate solutions. The report evaluates the investment strategies of 29 city and state pensions and one permanent fund. By highlighting leaders that are already setting targets to invest tens of billions of dollars in climate solutions, it shows that investing in real-economy decarbonization is feasible, financially responsible, and fully consistent with fiduciary duty.
- Read the report: The Climate Solutions Gap: An Assessment of U.S. Public Pensions’ Investment Strategies
- Read the press release: New Report: Most U.S. Public Pensions Lag on Investing in Climate Solutions Needed to Protect Retirement Savings
- Read more: Bloomberg, Financial Times Sustainable Views, Green Central Banking, Responsible Investor, Net Zero Investor, and Sustainable Investor
- Take action: Urge Public Pensions to Adopt Climate Investment Principles
The report identifies six key takeaways that show how pensions can better manage climate risk and strengthen long-term retirement security.
1) Investing must focus on real-economy impacts, not portfolio metrics.
Because public pensions are long-term, diversified investors, their returns depend heavily on the overall health of the economy. To protect retirement savings from climate-related risks, pensions must address the root of climate-related financial risk: real-world climate impacts. One critical strategy is directing capital to projects and technologies that decarbonize the economy, build community resilience, and support a just transition.
Unfortunately, too many pensions prioritize achieving net-zero portfolio emissions over real-world emissions reductions, an approach that mostly shifts numbers on a balance sheet without reducing the underlying risks. Only investments that drive real-economy decarbonization can meaningfully protect beneficiaries’ long-term financial security. It’s critical that more pensions focus on strategies that help drive real-economy decarbonization and climate resilience, like investing in climate solutions.
2) More pensions need to set targets for climate-solutions investments.
While only a handful of pensions are taking meaningful steps today, important leadership is emerging. Five pensions have adopted time-bound, quantitative targets to invest billions in climate solutions over the next 5-10 years. Three pensions have disclosed strategies for climate-solution investments, but lack measurable targets to guide or scale these investments.
The fact that pensions of varying sizes, staffing structures, and political contexts are making these moves and setting targets demonstrates that fiduciaries view this strategy as prudent and fully consistent with fiduciary duty.
This report underscores that setting targets for climate-solutions investing is not only possible, but already underway across the public pension landscape.
3) Not all targets are created equal. Guardrails are needed.
While more pensions are beginning to set targets, not all targets are equally credible. They vary widely in scale and in whether they allow controversial technologies or false climate solutions to count toward their goals.
The most effective way for pensions to avoid greenwashing and to ensure their strategies are credible is to adopt the Principles for Climate Solutions Investments. Such policies clearly define what qualifies as a climate solution and what does not. Strong guardrails help prevent situations like classifying investments in major fossil fuel companies as “climate solutions” (which CalPERS is currently doing) and instead ensure that climate-solutions investments help drive real-economy decarbonization.
To ensure investments also support a just transition, pensions should pair these guardrails with strong labor and just transition principles.
4) Pensions need to realize that "climate solutions” means more than clean energy.
The analysis revealed a clear trend: pensions are more heavily pursuing investments in clean energy than in any other category of climate solutions. This suggests that most pensions, and their fund managers, treat climate solutions primarily as an energy-sector issue, while overlooking other areas where investment is critically needed.
Clean energy investments are vital, but investment is needed across many sectors, including nature and biodiversity, just transition, and climate resilience.Broadening the scope of climate solutions also supports portfolio diversification, further strengthening risk management.
5) Pension boards need to be more involved in climate-risk investment strategies.
The analysis found that only 26% of pensions have boards actively engaged in a comprehensive climate strategy. Another 7% have boards focused solely on climate-related stewardship and proxy voting. This is a helpful first step, but not enough.
Boards are ultimately responsible for setting the pension’s direction and strategy, and are accountable as fiduciaries. As climate-related financial risks grow, it’s critical for boards to be actively involved in overseeing strategies that manage these risks across all investment decisions, not just stewardship.
6) Transparency and regular reporting are critical.
Regular progress reporting is essential for credible climate-strategy implementation. It enables fiduciaries, beneficiaries, and the public to understand whether commitments are being met and whether climate-related financial risks are being effectively managed.
Only four pensions analyzed provide consistent progress reports on stated climate-related targets. But even these leaders need to improve transparency, because without detailed holdings disclosures, it can be difficult to assess whether investments genuinely advance climate solutions or are greenwashing, such as counting fossil fuel investments toward climate goals.
Explore the rankings
How does your pension rank when it comes to investing in climate solutions? Check out the handy scorecard below analyzing the climate-solutions investment policies and commitments of the 30 institutions assessed in the report:
- Massachusetts: Boston Retirement System (BRS)
- California: California Public Employees' Retirement System (CalPERS); California State Teachers' Retirement System (CalSTRS); Los Angeles County Employees Retirement Association (LACERA)
- Colorado: Colorado Public Employees' Retirement Association (CoPERA)
- Connecticut: Connecticut Retirement Plans and Trust Funds (CRPTF)
- Delaware: Delaware Public Employees' Retirement System (DPERS)
- Florida: Florida State Board of Administration (Florida SBA)
- Hawaii: Hawaii Employees’ Retirement System (HERS)
- Illinois: Chicago Teachers' Pension Fund (CTPF), Illinois State Board of Investment (ISBI), Teachers’ Retirement System of the State of Illinois (TRS)
- Maine: Maine Public Employees Retirement System (MainePERS)
- Maryland: Maryland State Retirement and Pension System (MSRPS)
- Massachusetts: Massachusetts Pension Reserves Investment Management Board (MassPRIM)
- Michigan: State of Michigan Investment Board (SMIB)
- Minnesota: Minnesota State Board of Investment (SBI)
- New Hampshire: New Hampshire Retirement System (NHRS)
- New Jersey: New Jersey State Investment Council (NJSIC)
- New Mexico: New Mexico Public Employees Retirement Association (NMPERA); New Mexico State Investment Council (NMSIC)
- New York: New York City Comptroller (NYCERS, BERS, TRS); New York State Common Retirement Fund (NYSCRF); New York State Teachers’ Retirement System (NYSTRS)
- North Carolina: North Carolina Retirement Systems and Ancillary Governmental Participant Investment Program (NCRS)
- Oregon: Oregon Investment Council / Oregon Public Employees Retirement Fund (OIC / OPERF)
- Texas: Employees Retirement System of Texas (ERS);
- Washington: Seattle City Employees' Retirement System (SCERS); Washington State Investment Board (WSIB).
- Vermont: Vermont Pension Investment Committee (VPIC)
