By Robin Mann, Member, Southeastern Pennsylvania Group
Climate change is posing mounting risks to the global economy. The costs associated with climate-related events continue to rise, already reaching hundreds of billions of dollars in damages each year. As the national Sierra Club's Sustainable Finance program points out in their recent report, The Long Term will be Decided Now, annual losses to the global economy could reach $38 trillion by mid-century. The program is working to build awareness that climate change poses a systemic risk to investment portfolios that cannot be mitigated through traditional portfolio diversification strategies. Responsible investors need to recognize not only that continued investment in fossil fuel expansion heightens the risk to the future value of funds, but to further mitigate those risks they need to be proactive in shifting capital towards building a sustainable economy.
A key focus of the Sustainable Finance team is on the long-term financial security of the millions of Americans planning to rely on pension and retirement funds in their later years. Climate change poses a systemic risk to those funds and institutions that manage those long-term investments need to recognize that their fiduciary obligation extends to addressing and mitigating that risk. Recognizing that continued investment in fossil fuel companies expanding fossil fuel production, and the banks financing them, accelerates risk is a start. But as the team's most recent annual Hidden Risk in State Pensions report highlighted, pension and retirement fund managers need to do more -- they should be at the forefront among long-term investors in seeking to shift the trillions of dollars under their management towards building a sustainable economy as well as in leveraging that enormous financial influence in shifting corporate behavior towards embracing sustainability.
In recent years, some state pension funds have stepped up in recognizing their fiduciary responsibility to incorporate climate risk into stewarding the assets under their management and also in their shareholder engagement strategies. But as indicated in the Hidden Risk report and newly released interactive tracker on proxy voting by the largest pension funds, it's a very mixed bag. Many of the state and other public pension funds remain passive on climate risk, especially in the wake of the adoption of "anti-ESG" legislation and executive actions in numerous states, which bar Environmental, Social and Governance risk-informed investment.
Pennsylvania’s pension fund gets an “F” from Sierra Club
It is disappointing to see how Pennsylvania's Public School Employees' Retirement System (PSERS) -- one of 32 of the largest and most influential public pension funds in the U.S. profiled, which manage $3.8 trillion in assets -- measures up. PSERS is among the funds receiving a grade of "F.” As the tracker shows, Pennsylvania Treasurer Stacy Garrity, who sits on the Board of Trustees of PSERS, signed onto a letter circulated among anti-ESG states opposing asset manager BlackRock's approach to fiduciary duty, "where speculative assumptions about the future, like climate change catastrophe, are used to justify ideological conclusions today." And PSERS' proxy voting guidelines call for deferring to management on environmental issues rather than seeking to boost corporate ambition by supporting pro-environment shareholder proposals. The Hidden Risk report provides important recommendations for public pensions to improve their proxy voting guidelines and better safeguard their members' savings.
PSERS has a responsibility to steward the retirement savings of all public sector workers–from those counting down the days to their hard-earned retirement, to those just beginning their careers. Holding polluters accountable and advocating for sustainable, long-term returns is a key part of their job. Pensions determine how they’ll vote on the issues in their “proxy voting guidelines.” You can tell PSERS to update theirs with stronger climate standards at one of their Board meetings.
This blog was included as part of the November 2025 Sylvanian newsletter. Please click here to check out more articles from this edition!