New Sierra Club Analysis Shows U.S. Public Pensions Hold Billions in Fossil Fuel Bonds

WASHINGTON, D.C. — Today, Sierra Club released a new analysis of public data published by Urgewald on fossil fuel bond holdings across 40 U.S. public pension funds, finding that fossil fuel debt remains embedded in public pension portfolios and available bondholding data are significantly incomplete. The analysis underscores that even if a public pension has a climate policy, emissions target, or other climate risk-management framework, it can still maintain substantial exposure to the debt of companies pursuing activities that contribute to systemic climate risk, which threatens millions of workers' retirement savings. 

Key findings include: 

• Fossil fuel expansion-related debt remains embedded in public pension portfolios, with more than $19 billion in disclosed bond holdings across the 40 U.S. public pensions analyzed. 
• Available bondholding data are significantly incomplete: Fossil fuel bond holdings could only be identified for 15 of 40 pension funds. 
• Disclosed exposure varies substantially across funds and is not simply a function of portfolio size, but incomplete and uneven data mean those differences may reflect some combination of actual holdings, investment practices, and data availability. The identified fossil fuel expansion-related debt in public pension funds is only a floor, rather than a complete picture of total holdings.
• The size of fossil fuel expansion-related debt held by public pension funds underscores the need to assess whether climate commitments translate into investment practices across all asset classes, warranting more attention to climate-risk strategies and restrictions on new bond purchases from companies engaging in fossil fuel expansion. 

The analysis draws on data from Urgewald’s Investing in Climate Chaos 2026, which identifies institutional investor holdings in companies on the Global Coal Exit List (GCEL), 2026 Metallurgical Coal Exit List (MCEL), and 2025 Global Oil & Gas Exit List (GOGEL). For the full dataset and pension-by-pension results, see the accompanying dashboard.

“Our analysis shows that fossil fuel expansion-related debt remains a significant, if often overlooked, part of pension portfolios. If pension funds want to reduce the growing financial risks caused by climate change, they must take steps to better align their investment practices accordingly,” said Jessye Waxman, Campaign Advisor, Sierra Club’s Sustainable Finance Campaign. “Managing climate-related risks is not simply a question of looking at emissions associated with investments. It requires a full consideration of how investment decisions themselves contribute to the expansion of high-emitting activities and whether these decisions reinforce or mitigate the very risks investors are seeking to manage or avoid. This is critical for public pension funds to address since their obligations extend decades into the future and are deeply exposed to systemic climate risks.” 

Pia Wiesner, Senior Fossil Finance Researcher for Urgewald added:
“This data provides an important window into an area of public pension portfolios that remains difficult to see: their exposure to fossil fuel expansion-related debt. Public holdings already amount to billions of dollars. While the data is necessarily incomplete, this indicates that the scale of fossil fuel financing embedded in pension portfolios is massive and warrants more transparency. Consistent disclosure is necessary to show beneficiaries, policymakers, and investors the full extent of this issue and assess how well climate policies are being implemented across asset classes.”

As part of this new analysis, Sierra Club has compiled recommendations for pensions to mitigate climate risk: 

• Restrict new bond purchases: Prohibit new purchases of bonds from companies expanding fossil fuel production or infrastructure, in both primary and secondary markets, and incorporate these criteria into fixed-income investment guidelines and manager mandates. 
• Phase down existing exposure: Establish a plan to reduce existing bond holdings in companies continuing fossil fuel expansion, considering maturities, liquidity, and portfolio constraints. This should complement, not substitute for, restrictions on new primary-market financing.
• Address indirect exposure: Apply these expectations to external managers and assess fossil fuel bond exposure through index funds, commingled funds, and other pooled vehicles. 
• Increase transparency: Publicly disclose fossil fuel bond holdings, including indirect exposure, and report on implementation of the pension’s fossil fuel financing restrictions.
• Integrate into climate-risk management: Incorporate fossil fuel bond exposure and financing into the pension’s broader framework for managing climate-related financial risks. Ensure that resulting restrictions and eligibility rules govern fixed-income investment and manager decisions.

Background:

Fixed income is one important channel through which investors can influence whether capital continues to flow to high-emitting companies and activities. When investors purchase newly issued bonds, they provide new capital directly to companies. Where a company’s strategy includes developing new fossil fuel assets or infrastructure, this financing can support that expansion directly or indirectly, contributing to carbon lock-in and exacerbating systemic climate risk.

Primary-market purchases, bonds purchased directly from the issuer, are the most direct way investors provide new financing. For that reason, investors seeking to limit financing for fossil fuel expansion should pay particular attention to whether they are participating in new debt issuances by companies pursuing that expansion. Secondary-market demand is also relevant because it supports liquidity and the broader market for this debt, which can facilitate refinancing and future access to capital. For long-term investors, limiting the flow of new capital to companies pursuing fossil fuel expansion is an important component of managing systemic climate risk. 

The growth of passive investment strategies has also made index-based vehicles an important channel through which capital is allocated. The recently launched BCam Indices provide one example of how criteria related to fossil fuel expansion can be incorporated into investment-grade corporate bond benchmarks.