The Hidden Risk in State Pensions

Executive Summary

Public pensions manage trillions of dollars on behalf of workers and retirees. As long-term, diversified investors, their ability to provide reliable retirement benefits depends on the health of the broader economy. Climate change poses a systemic and systematic risk — an un-diversifiable, un-hedgeable, and escalating threat that will affect companies across all markets.

If global greenhouse gas emissions are not cut rapidly, the performance of diversified investment portfolios and the retirement security they support could be significantly diminished. Given the long-term nature of public pensions’ commitments and their exposure to economy-wide risks, their ability to provide reliable retirement benefits relies on the economy’s overall health.

 Pensions can help protect both their beneficiaries’ interests and the economy as a whole from climate-related financial risks by taking actions that reduce greenhouse gas emissions associated with their investments. To achieve this, portfolio companies will need to adopt and implement credible net-zero plans that align their business activities with the goals of the Paris Agreement. Public pensions, as some of the world’s most influential investors, can support corporate climate action in part by exercising their shareholder voting rights at the annual meetings of public companies to advocate for credible transition plans and risk oversight. This report evaluates how effectively major U.S. public pensions are using proxy voting to meet that responsibility.

In the Sierra Club’s third annual Hidden Risk in State Pensions report, we analyze the proxy voting guidelines and climate-related voting records of 33 U.S. public pension funds. The 2025 votes in this analysis include Board of Directors elections and climate-related shareholder proposals on issues including emissions disclosures, impact reports on Indigenous Peoples, and target-setting aligned with companies’ stated net-zero goals.

Overall grades: Three pension systems — New York State Common Retirement Fund (NYSCRF), three New York City pensions (NYCERS, TRS, BERS), and Vermont Pension Investment Commission (VPIC) — joined Massachusetts Pension Reserves Investment Management (PRIM) in earning overall “A” grades in this year’s report, due to strong proxy voting guidelines and consistent support for climate- and sustainability-related shareholder resolutions. Massachusetts (PRIM) was the only pension to receive an “A” grade in last year’s report. (The proxy voting records of New York (NYSCRF) and Vermont (VPIC) were not previously evaluated due to their later disclosure dates, and did not receive final grades in the previous report.)

Trends in guideline grades: In 2025, one pension fund, Vermont Pension Investment Commission (VPIC), adopted stronger climate-related proxy voting guidelines. VPIC’s updated guidelines emphasize the role of proxy voting in addressing systemic climate risks and strengthen its policies on climate, biodiversity, environmental justice, and just transition. 

Trends in voting grades: Four pensions — California State Teachers' Retirement System (CalSTRS), Connecticut Retirement Plans and Trust Funds (CRPTF), New Jersey Division of Investment (NJDOI), and Washington State Investment Board (WSIB) — earned higher voting grades in 2025 than in 2024, signaling increasing support amongst these pensions for climate-related resolutions in a year that saw overall support declining. However, four pensions — Maryland State Retirement and Pension System (SRPS), New York State Teachers' Retirement System (NYSTRS), State of Wisconsin Investment Board (SWIB), and University of California Retirement Plan (UCRP) — earned lower voting grades in 2025 as their overall support for climate-related resolutions dropped. These pensions’ declining support followed national trends for climate-related proposals: not only were fewer proposals filed in 2025, but climate-related proposals also received lower overall support from investors. This was largely due to political and regulatory headwinds, not a reduction in climate-related financial risk. 

Pensions with strong proxy voting guidelines maintained support for climate risk management despite broader turmoil, but pensions with less comprehensive guidelines — such as Maryland (SRPS), Wisconsin (SWIB), New York State Teachers' Retirement System (NYSTRS), and University of California (UCRP)— wavered. This report shows that while some pensions vote with greater ambition than prescribed by their policies, strong proxy voting guidelines remain an important precondition for consistent support for climate-related resolutions.

Board accountability rises: In 2025, more pensions voted against at least one director than in 2024, for a total of 18 pensions, up from 15 the previous year. Most pensions do not disclose their voting rationale, but the 20% increase in pensions voting “no” at least once represents a significant increase in investor willingness to hold directors accountable for oversight failures. 

All the pensions highlighted in this report could do more to shield their beneficiaries from growing climate-related financial risks. Strengthening their proxy voting guidelines will be essential to better direct voting practices in 2026 and beyond. The recommendations outlined in this report provide a framework for strengthening stewardship practices accordingly.

Introduction

This report examines public pension proxy voting, a core governance tool investors use to engage with companies in their portfolios. It evaluates both the extent to which U.S. pensions voted in favor of climate action and the strength of the guidelines that informed these votes. The 33 pensions covered in this report, representing the largest and most influential public funds in the U.S., were graded on two criteria:

1) Proxy voting guidelines: Pensions’ proxy voting guidelines were evaluated for their strength on climate- and environment-related risks, including systemic risks. Voting guidelines outline the criteria pension staff or proxy advisors use to assess shareholder resolutions and management-backed proposals, including director elections. Strong guidelines enable pensions to consistently support measures that help mitigate climate change and related risks. 

2) Proxy voting records in 2025: Pensions were evaluated on their voting records on a set of climate-related shareholder proposals and director votes at financial institutions, utilities, automakers, oil and gas companies, and tech companies during the 2025 proxy season. These sectors represent the largest sources of emissions, or the largest enablers of fossil fuel expansion, in the U.S. 

Despite the continued rise in climate-related disaster costs, home insurance instability, and cost-of-living pressures, the 2025 proxy voting season saw fewer social- and environment-related resolutions filed overall, down 40% from 2024, even while shareholder activity increased outside of the U.S. 

These resolutions also received lower overall support from investors. Climate proposal support dropped from an average of 20% in 2024 to just 10% in 2025. Declining support does not reflect a reduction in climate risks, but instead reflects political headwinds, particularly in the U.S., and a reluctance among many investors to move beyond disclosure-based proposals. Climate policies are not only becoming increasingly polarized under a new federal administration, but restrictions on shareholder activities have spread from state capitals to federal regulators. State-level “anti-ESG” laws have created blacklists for asset managers perceived as advancing environmental or social objectives, challenged the recommendations of proxy advisors, and restricted public pension funds from considering sustainability risks. 

At the federal level, the Securities and Exchange Commission (SEC) issued several new updates that introduced restrictions and uncertainty into the shareholder process. In February 2025, the SEC published SLB 14M, which expanded companies’ ability to file no-action requests — a tool that was then used in record numbers. The rule change also raised the threshold of support required for shareholders to re-file proposals at future shareholder meetings, from 2% to 5%. The SEC also announced in November 2025 that it will no longer referee shareholder proposals, declining to provide responses to no-action requests. Instead, the SEC only requires that companies provide notice of proposals they plan to exclude from proxy materials.

In the face of regulatory changes, many investors paused engagements, withdrew proposals, or otherwise proceeded with more caution in 2025. Still, a number of climate-related proposals appeared on proxies, and this report evaluates the strength of public pensions’ support for climate action in the boardroom. Climate-related resolutions will continue to come up for a vote, even if in smaller quantities. Furthermore, director elections will provide annual opportunities to raise investor concerns not found in proposals, including on climate risk management. Shareholders may turn to alternative measures if proposals are omitted, including legal action or filing resolutions on the floor of shareholder meetings. 

The regulatory and political context may be in flux, but climate risks remain and pose a threat to workers’ retirement savings. A 2024 report from Ortec Finance, which assessed the risks to the top 30 U.S. pension funds, warned funds could “face investment return declines of up to 50% by 2040 if climate policies remain unaddressed.” These losses stem from many sectors and sources: declining crop production, increased healthcare costs, heat-related productivity declines, physical damage to infrastructure, and much more. Because public pensions are long-term universal owners with exposure across sectors and asset classes, they cannot diversify away from economy-wide climate risk, and their ability to meet retirement obligations ultimately depends on the overall health of the economy.

Pensions have an obligation to act on climate to protect their members’ savings from potential climate-related losses. In order to mitigate climate-related financial risk, public pensions must use their proxy voting power to support portfolio companies in pursuing credible net-zero transition pathways aligned with the goals of the Paris Agreement. 

Unfortunately, as this report reveals, far too few public pensions adequately utilize their proxy voting power to mitigate climate risks. Many have weak proxy voting guidelines and, as a consequence, do not consistently vote to hold companies accountable to equitable, science-based transition plans. This raises serious questions about whether current stewardship practices are aligned with the scale of climate-related financial risks facing pension beneficiaries.

Part 1: Strong Guidelines Support Strong Votes

Only one pension, Vermont (VPIC), made a significant change to its proxy voting guidelines in 2025. However, several pensions’ overall grades changed, reflecting both improvements and declines in proxy voting performance.

Four pension systems earned overall “A” grades in this year’s report, due to strong proxy voting guidelines and consistent support for climate- and sustainability-related shareholder resolutions, up from only one in 2025:

• New York State Common Retirement Fund (NYSCRF), Massachusetts Pension Reserves Investment Management (PRIM), three New York City pensions (NYCERS, TRS, BERS), and Vermont Pension Investment Commission (VPIC).

Three pensions followed with “B” grades for strong 2025 proxy voting records: 

• California Public Employees’ Retirement System (CalPERS), Connecticut (CRPTF), and Oregon Public Employees Retirement System (PERS).

Several pensions saw their overall grades change:

• University of California (UCRP) dropped from an overall grade of a “B” to a “C” due to a significant decline in support for climate proposals between 2024 and 2025. 
• Washington (WSIB) improved from a “D” to a “C” due to modest improvements in its proxy guidelines and its voting record.
• California (CalSTRS) improved from a “D” to a “C” due to modest improvements in its voting record.

Maryland (SRPS) and Maine Public Employees Retirement System (MainePERS) dropped from a “D” to an “F” for their failure to support a single climate-related proposal; both voted against one director.

Strong proxy voting guidelines underlie the voting policies of pensions with the highest overall support for climate- and sustainability- related resolutions. These funds earn “A” and “B” grades on both guidelines and voting records, and appear in the “aligned leaders” quadrant of the chart above. These funds not only scored highly overall, but they also have leading-edge guidelines that set high expectations for portfolio companies, detailed later in this report. Conversely, pensions with sparse policies that don’t incorporate climate risks supported few to no climate- and sustainability-related shareholder proposals. 

However, a number of funds vote better than their guidelines, which earn “C” and “D” grades, might otherwise prescribe. Most funds do not disclose the rationale behind their voting decisions, but a few patterns illustrate what may be behind the strong voting performance: 

Funds labeled “votes outpacing policy” have lower overall grades than their peers with higher alignment. However, most have “strong” grades in just one category and/or “developing” grades in just a few. The inclusion of relatively ambitious climate language in one area indicates a baseline understanding shared between the board members who approve proxy guidelines and the staff that implement them: climate change poses risks worth engaging with. For some pensions, this leads to strong voting records across climate-related resolutions.

Staff or proxy advisors may translate their knowledge of climate-related risks and interpretation of board intent into high levels of support for climate-related proposals when guidelines are less detailed, giving them more discretion. But that is not guaranteed, nor should it be expected. Some funds in a similar position supported fewer resolutions overall: University of California (UCRP) has two “strong” policies: for climate-related votes on directors and biodiversity, but supported just 27% of the shareholder resolutions tracked in this report. Wisconsin (SWIB) has a strong climate-related director policy, but failed to support a single climate-related shareholder resolution. 

Additionally, pensions with less comprehensive guidelines may have greater variation in voting records year-over-year. Pensions with strong proxy voting guidelines maintained their support for climate risk management despite broader political turmoil in 2025, but pensions with less comprehensive guidelines — such as Maryland (SRPS), Wisconsin (SWIB), and University of California (UCRP)— wavered, and earned lower voting grades as their overall support for climate-related resolutions dropped. It is unclear whether inconsistent support is due to a lack of expertise or prioritization in addressing climate risks. It is clear, however, that board direction matters for maintaining strong voting performance.

State Teachers Retirement System of Ohio (STRS Ohio), which earned a “D” on its guidelines in the 2025 edition of this report, has since removed detailed guidelines from its website, yet maintained its “A” voting grade this year. The fund serves beneficiaries in a state with “anti-ESG” legislation that states: 

“The board, in accordance with its fiduciary duties described under this section, shall make investment decisions with the sole purpose of maximizing the return on its investments. The board shall not adopt a policy, or take any action to promote a policy, under which the board makes investment decisions with the primary purpose of influencing any social or environmental policy or attempting to influence the governance of any corporation.” 

The law does not state whether the board may adopt a policy to support environmental or social policies that support the fund’s goal of maximizing its return on investments, nor does it address risks associated with poor governance. Despite this lack of clarity, STRS Ohio’s proxy voting record indicates continued support for climate-related risk oversight.

While most shareholder resolutions frame their requests as disclosures of information to shareholders, the ambition of the proposals varies. Some are truly data-focused, such as seeking a report on environmental or community impacts, while others request insight into company policies and goals, such as their plan to transition to a clean energy economy. The latter type of proposals is categorized as “target-setting and implementation” resolutions in this report, representing 7 out of 25 assessed resolutions. These proposals go beyond assessing climate risks to providing insight into whether companies are taking necessary steps to mitigate them.

Support by type of resolution was relatively even across resolution topics, but as ambition increased, support dropped:

• Resolutions focused on disclosures earned support from 46-54% of evaluated pensions 
• Resolutions focused on target-setting earned support from 33-34% of evaluated pensions 

Requests for companies to disclose their policies, particularly in line with best practices (such as a transition plan meeting the standards of the Science Based Targets Initiative), are more ambitious and communicate higher standards than requests for data. Disclosures provide investors with information about which companies face certain risks, whether physical, regulatory, or transition-related. Greenhouse gas reduction targets and related policies go further to support risk mitigation across the portfolio.

This “ambition gap” represents an opportunity, and a necessity, for pension funds to move past measuring climate- and sustainability-related risks to supporting proposals that mitigate them. For most, this requires updating proxy voting guidelines to support target-setting and policy adoption in line with global standard-setters.

Part 2: Proxy Voting Guidelines

Proxy voting is one of a pension’s strongest tools for corporate governance. The votes pensions take during a company’s annual meeting are determined by its voting guidelines. Pensions may write their own guidelines or delegate the responsibility to proxy advisors or their asset managers, who vote on behalf of pension funds. Most pensions retain board oversight for the proxy voting process. 

Strong guidelines ensure consistency in voting across different portfolios and fund managers, and establish standards and expectations for all (or a defined set) of sectors. This transparency makes it easier to communicate expectations to portfolio companies and helps inform pension beneficiaries how their investments are being managed.

Methodological overview: In this report, pensions were evaluated on the scope and depth of their guidelines on a set of critical climate issues. In addition to policies directly concerning greenhouse gas emissions, proxy voting guidelines were assessed for the strength of policies addressing biodiversity loss, lobbying disclosure, just transition, environmental justice, Indigenous Peoples’ rights, and board director oversight of climate strategy. The strongest guidelines indicated support for the adoption of best-practice policies, while weaker guidelines only supported target setting or disclosures. 

The pensions’ guidelines were evaluated in each category, with cumulative grades determining the final grade. “F-” grades, which reflect an overall negative score, were assigned in instances where “anti-ESG” language appeared in the proxy voting guidelines. Guidelines updated after December 31, 2025, are not included in this report. The full methodology used to assess guidelines can be found in Appendix #2 of this report.

Only one pension’s proxy voting guidelines scored well above the rest of the pensions analyzed, earning an “A” grade: 

• New York (NYSCRF).

Five more pensions rounded out the top performers, earning “B” grades for a consistent commitment to engaging on climate- and sustainability-related risks:

• Connecticut (CRPTF), Massachusetts (PRIM), three New York City pensions (NYCERS, TRS, BERS), California (CalPERS), and Vermont (VPIC).

Eleven pensions earned “C” and “D” grades for guidelines that acknowledged climate and sustainability risks, but lack policies that protect the funds against such risks:

• “C” grades: California (CalSTRS), Oregon (PERS), and University of California (UCRP). 
• “D” grades: Los Angeles County Employees Retirement Association (LACERA), Maryland (SRPS), Minnesota State Board of Investment (SBI), Wisconsin (SWIB), Washington (WSIB), New Jersey (NJDOI), North Carolina Retirement Systems (NCRS), and State of Michigan Investment Board (SMIB). 

All other pension systems earned “F” grades for sparse proxy voting guidelines that did not address climate-related risks, or “F-” grades for explicit “anti-ESG” language that prohibits pensions from considering climate-related risks. 

Several pensions moved from “F” to “D” grades in this year’s report due to minor methodological changes. However, the improved grades do not reflect progress toward strengthening protections against climate risk, and all of these pensions must update their guidelines to match best practices.

Seven pensions were given the highest possible scores for their systemic risk statements:

• New York (NYSCRF), Connecticut (CRPTF), three New York City pensions (NYCERS, TRS, BERS), California (CalPERS), Vermont (VPIC), California (CalSTRS), and Los Angeles County (LACERA).

Three pensions were given the highest possible scores for their guidelines on director accountability: 

• New York (NYSCRF), Connecticut (CRPTF), and University of California (UCRP).

Five pensions earned “strong” evaluations of their climate policies, earning 10 or more points out of the 13 available, but no pension earned full points in the category. Those policies support proposals that request the adoption of climate policies. Full points require an escalation pathway with investment consequences. This is an approach occasionally practiced by U.S. pensions but not codified in proxy guidelines.

• New York (NYSCRF), Massachusetts (PRIM), three New York City pensions (NYCERS, TRS, BERS), Vermont (VPIC), and Oregon (PERS). 

In 2025, one pension fund — Vermont (VPIC) — strengthened its proxy voting guidelines to directly address systemic risks. The most significant update moved VPIC from only supporting disclosures on biodiversity- and nature- related risk, to a detailed list of disclosure expectations and support for actions that mitigate risk, including calling upon companies to adopt no-deforestation policies.

VPIC’s updated policies on just transition and environmental justice now read “Vote FOR proposals that encourage the adoption of practices and policies to reduce harm to workers and vulnerable communities.” The fund’s just transition policy is among the strongest of its peers, matched by Massachusetts (PRIM). VPIC’s biodiversity and environmental justice policies are also matched only by one peer each — New York (NYSCRF) and Connecticut (CRPTF), respectively. VPIC has set a strong standard for proxy voting guidelines with clear expectations for corporate action to report on risks in line with best practice recommendations and then take steps to reduce those risks. 

Conversely, only one pension revised its guidelines to walk back support for responsible investing — STRS Ohio. The pension’s current Investment Policy simply reads “[proxies] should be voted in the best interest of STRS Ohio active and retired members.” 

STRS Ohio is subject to restrictions in investment decisions under SB6, a law that went into effect in 2025, which states “the board shall not make an investment decision with the primary purpose of influencing any social or environmental policy or attempting to influence the governance of any corporation.” Although SB6 restricts investment decisions motivated primarily by social or environmental objectives, the statute does not prohibit consideration of financially material climate-related risks. STRS Ohio’s proxy voting record, detailed later in this report, demonstrates a commitment to protecting beneficiaries’ savings from climate risk. 

The majority of U.S. pension funds assessed in this report have work to do to update their proxy voting guidelines to reflect evolving best practices and push corporations to take actions on climate change. Investors have successfully engaged companies to commit to a flurry of net-zero climate commitments, but the last several years have seen significant backsliding on climate commitments, especially from major banks like Wells Fargo and oil and gas companies like Shell. 

Research has found that increased climate disclosures have marginal impacts on corporate climate emissions. While measuring carbon emissions provides useful information to portfolio companies and investors, focusing engagements on disclosures rather than substantive policy changes and innovations is an insufficient strategy to address the systemic risks of climate change. 

Instead, requiring real-world emissions reductions by portfolio companies is the true measure of progress. Investors should seek science-based, third-party-verified emissions reduction targets that reduce absolute emissions in line with the goals of the Paris Agreement. For most pension funds in this report, stronger proxy voting guidelines will enable pensions to more consistently support shareholder resolutions that request target setting and measurable climate progress. 

Many pensions have extensive expectations for corporate boards of directors and detailed guidance for when they will vote against board members for oversight failures. However, only five pension systems evaluated in this report had “strong” climate-related director accountability policies — New York (NYSCRF), Connecticut (CRPFT), Massachusetts (PRIM), University of California (UCRP), and Wisconsin (SWIB). These pensions have policies that vote against directors at companies that have not disclosed transition plans after setting targets and/or against companies that have not aligned their business strategies with the goals of the Paris Agreement. This gap in pension policies indicates that many pensions are not sufficiently ambitious in mitigating climate risks by utilizing their shareholder rights, leaving a key tool for corporate engagement and portfolio protection underutilized.

Director-level accountability is not only appropriate for climate risk and a good complement to voting on resolutions, but it’s also becoming increasingly important as shareholder proposals decline in number. In 2025, the number of environmental and social shareholder resolutions was down 40% compared to 2024, a trend that may continue in 2026 with regulatory changes at the federal level. By contrast, companies’ boards of directors are up for reelection annually, and many directors face “vote no” recommendations from responsible investors and advocacy groups for failure to address climate risks. 

Biodiversity loss presents significant portfolio risks, from the collapse of resources such as wild pollination, timber, and fisheries. Ecosystem destruction is a key driver of both global greenhouse gas emissions and biodiversity loss. The Intergovernmental Science-Policy Platform on Biodiversity and Ecosystem Services estimates that ecosystem services and natural capital have declined by 40%. Among other recommendations, it encourages financial actors to support “consistent risk assessment frameworks for biodiversity-related financial decision-making.”

Only three pension funds have strong biodiversity guidelines — New York (NYSCRF), Vermont (VPIC), and University of California (UCRP). The strongest possible policy would support resolutions calling for the adoption or strengthening of policies that would prevent or reduce negative impacts on biodiversity, forests, and other natural landscapes throughout the company’s operations, products, and value chains, or resolutions calling for the alignment of corporate practices with either the Global Biodiversity Framework (inclusive of value chain sourcing) or the Accountability Framework Initiative (AFi).

Indigenous peoples have advocated for their rights in boardrooms for years. There is a strong case for climate and biodiversity benefits of respecting Indigenous rights, particularly rights to self-determination and land. Indigenous people are the stewards of over 50% of the world’s intact forests, and the Global Biodiversity Framework calls for the protection of the rights of Indigenous peoples and local communities. 

Only four pensions — California (CalPERS), three New York City pensions (NYCERS, TRS, BERS), New York (NYSCRF), and University of California (UCRP) — specifically mention Indigenous peoples in the text of their policies, while others have “weak” or “developing” policies that signal support for some human-rights-related disclosures. Massachusetts (PRIM) does not mention Indigenous peoples’ rights specifically, but its policy supports due diligence and monitoring systems or grievance mechanisms, providing a comprehensive set of governance expectations on human rights. 

The strongest possible policy would expressly support resolutions calling for the adoption of policies aligned with the UN Declaration on the Rights of Indigenous Peoples and/or improvements to policies on Free, Prior, and Informed Consent and economic reconciliation and co-development plans that recognize Indigenous land ownership. 

Experts emphasize that investor action on just transition helps deepen knowledge of systemic risks: a mismanaged transition is not merely a political concern but could deepen economic inequality and the associated systemic risks. Furthermore, the transition to a clean energy economy will impact many municipalities served by public pension funds, potentially driving loss of industry, jobs, and tax revenue. Alternatively, a successful just transition can support thriving communities with strong public budgets and drive value for investors. Pension funds should amend their proxy voting guidelines to support transparent policies that encourage companies to adopt a just transition policy and reduce and redress harms to workers and communities tied to a company’s low-carbon transition. 

Two pensions have strong just transition policies — Massachusetts (PRIM) and Vermont (VPIC). MassPRIM’s policy is not only strong, but also clear: “Vote FOR resolutions asking companies to adopt policies or report on the impact of its climate change strategy on stakeholders (such as workers and communities) in a manner that is consistent with widely recognized ‘Just Transition' principles.” VPIC’s policy is similar and adds, “These measures are essential for mitigating legal and reputational risks that can directly erode shareholder value.”

While the fund does not meet the criteria of this report for a strong policy, Connecticut (CRPTF) has filed several just transition-related shareholder resolutions. 

New polluting infrastructure is disproportionately placed in Black, brown, and low-income communities, which already face high levels of air and water pollution. This inequitable distribution of pollution is increasingly becoming the concern of regulators, seen most clearly in the Biden Administration’s executive orders and the Inflation Reduction Act’s resources dedicated to environmental justice initiatives. While the current administration is rolling back environmental justice initiatives, states and cities are leading the way, adopting environmental justice laws and incorporating environmental justice into their planning processes. Companies that fail to consider environmental justice or effectively engage with local communities face reputational and litigation risks and organized local opposition that can lead to operational delays or permit denials.

Only two funds have strong environmental justice policies: Connecticut (CRPTF) and Vermont (VPIC). VPIC’s policy reads: “Vote FOR proposals that encourage the adoption of practices and policies to reduce harm to workers and vulnerable communities. These measures are essential for mitigating legal and reputational risks that can directly erode shareholder value.”

Environmental justice risks are outlined in the policies of 12 additional pensions, which primarily call for companies to audit their community impacts, earning them“developing” or “weak” grades. A strong policy goes further and calls for actions that not only prevent but also help redress harm: for example, by adopting policies to cease to build or finance polluting infrastructure in overburdened communities.

Eleven pensions in this report are in states that have “anti-ESG” laws or executive actions that restrict pension activities: Arizona, Florida, Indiana, Missouri, Nevada, North Carolina, Ohio, Pennsylvania, Tennessee, Texas, and Virginia. These pensions face scrutiny and restrictions for proxy voting language and investment decisions that consider non-traditional financial metrics. 

Only the Florida State Board of Administration (SBA) and Indiana Public Retirement System (INPRS) have incorporated language directly into their guidelines that echoes state law. Florida (SBA)’s policy states that fiduciary duty “does not include the consideration of the furtherance of any social, political, or ideological interests.” Other states facing “anti-ESG” restrictions offer no guidance on climate and sustainability-related issues. Several pensions — Virginia Retirement System (VRS), Public School and Education Employee Retirement Systems of Missouri (PSRS/PEERS), and Pennsylvania Public School Employees’ Retirement System (PSERS) — have adopted “corporate governance” or “board-aligned” policies of their proxy advisors, which by default vote in line with management recommendations.

These “anti-ESG” pensions scored lower than their peers because their proxy voting guidelines have language that prevents them from considering environmental and social risks in their voting decisions. In other words, these guidelines restrict consideration of certain environmental and social factors, including some that may be financially material to long-term portfolio performance. Some “anti-ESG” policies not only restrict measures for emissions-related accountability but also shield corporate actors from general scrutiny. 

However, not all laggards are based in states with “anti-ESG” policies. Notably, even pensions in states without “anti-ESG” legislation lack provisions in their guidelines to protect their beneficiaries' savings from climate-related risks, either lacking language altogether or indicating case-by-case support for ESG issues, broadly defined. Both groups fail to support climate-related shareholder proposals.

Regardless of the cause, the approach of these two groups limits overall support for climate-related proposals. By voting against climate proposals, these pensions weaken overall investor support for corporate climate action and underutilize available stewardship tools to mitigate climate-related financial risks facing pension beneficiaries.

Part 3: Proxy Voting Records in 2025

Evaluating pensions’ voting records allows for an analysis of whether pensions are putting their proxy guidelines into practice, and whether they’re taking the necessary steps to reduce the climate risks posed by companies in their portfolios and to their portfolios as a whole. 

This report focuses on pensions’ proxy voting on director elections and climate-related shareholder resolutions filed at companies in several key sectors: financial institutions, utilities, automakers, oil and gas companies, and tech companies. These industries were assessed because of the critical role they play in the transition to a low-carbon economy and are a key indicator of pensions’ commitments to reducing climate-related risks. 

While fewer resolutions went to a vote in 2025, pensions weighed in on a sweeping set of climate proposals. The evaluated resolutions included requests for Amazon to report on the impact of data centers on its ability to meet its climate commitments, for Bank of America to disclose its ratio of clean energy financing to fossil fuel financing, for Wells Fargo to report on the effectiveness of its policies to respect Indigenous peoples’ rights, and for Verizon to report on the alignment of its lobbying activities with its stated climate goals. 

Methodological overview: Pensions were scored depending on how often they supported climate-related resolutions and how often they opposed directors at key companies failing to mitigate climate risk. Each resolution was categorized by whether it was primarily concerned with disclosure, versus target setting and implementation, and grouped by issue area. Director vote recommendations were taken from Majority Action’s 2025 Proxy Voting for Climate. Pensions were graded by the percent of shareholder resolutions or votes cast against targeted directors. Each category of resolutions was weighed evenly in the overall grade. 

Six pensions supported 100% of the evaluated resolutions and voted against at least some of the recommended directors, earning “A” grades: 

• Massachusetts (PRIM), three New York City pensions (NYCERS, TRS, BERS), New York (NYSCRF), New Jersey (NJDOI), Oregon (PERS), and Vermont (VPIC). 

Three pensions followed close behind and also earned “A” grades, supporting at least 75% of the votes.

• STRS Ohio, California (CalPERS), and Connecticut (CRPTF). 

These pensions’ consistent support for resolutions spanning the facets of climate change, and ranging in ambition from disclosure to action, sets a high bar for their peers. These pensions with “A” voting records have proxy voting guidelines of a “C” or better, indicating that strong proxy guidelines are key for supporting climate votes across a range of sectors and topics.

STRS Ohio and New Jersey (NJDOI), which earned “A” grades, do not disclose detailed proxy voting guidelines that directly address climate risks.

Three pensions earned “B” grades, supporting at least 55% of votes: 

• Los Angeles County (LACERA), New York State Teachers' Retirement System (NYSTRS), and Washington (WSIB).

Four pensions voted against one or two directors, and yet failed to support climate- and sustainability- related shareholder resolutions. These funds earned “F” grades: 

• Maine (MainePERS), Maryland (MSRPS), and North Carolina (NCRS) voted against one director.
• Wisconsin (SWIB) voted against two directors. 

Eight pensions did not support a single climate resolution, failing to use all available tools to protect public sector workers and retirees’ savings from clear and growing climate risks. These funds also earned “F” grades:

• Colorado Public Employees’ Retirement Association (COPERA), Florida (SBA), Public Employees’ Retirement System of Nevada (NVPERS), Ohio Public Employees Retirement System (OPERS), Pennsylvania (PSERS), Teacher Retirement System of Texas (TRS), Missouri (PSRS/PEERS), and Virginia (VRS). 

Notably, this list includes both states with reputations as being climate leaders, like Colorado and Maryland, as well as states with “anti-ESG” legislation and rules, like Ohio and Texas. The voting records of these pensions fail to support climate and environment-related measures on both disclosure and target setting. This reflects inadequate oversight of key climate-related risks and positions them as laggards on climate accountability. 

These pensions are not using all available stewardship tools to protect their beneficiaries from the economic fallout of climate change. In addition to not supporting climate risk mitigation strategies at portfolio companies, their votes against disclosure resolutions mean they are limiting the access of all investors to key investment information. Without appropriate disclosure or risk mitigation strategies, these pensions are undermining their ability to deliver on the promise of long-term retirement security for beneficiaries. 

In 2025, more pensions voted against at least one director over 2024: 18 pensions, up from 15 the previous year. Most pensions do not disclose their voting rationale, but the 20% increase in “no” votes represents a significant increase in investor willingness to hold directors accountable for oversight failures. 

Despite this increase in director accountability, only 16 pensions have a “developing” or “strong” guideline for director voting, and voted against at most 4 of the 8 directors tracked in this report. No pension voted against all directors, as recommended by Majority Action. 

Additionally, nine pensions — University of California (UCRP), Colorado (COPERA), Florida (SBA), Missouri (PSRS/PEERS), Nevada (NVPERS), Ohio (OPERS), Pennsylvania (PSERS), Texas (TRS), and Virginia (VRS) — refrained from voting against any directors for failure of climate risk oversight.

This gap between corporate action and investor-led accountability is critical to address in 2026. As shareholder resolutions face increasing hurdles to appear on proxies, voting against directors will be a critical tool for influencing corporate climate action. The increase in participation in these “vote no” campaigns suggests that pensions may be escalating their pressure on portfolio companies in the absence of proxy ballot resolutions that reflect their concerns, but all will have to raise their ambition.

Appendices

For pensions looking to improve their proxy voting guidelines on the issues highlighted in this report, these model proxy voting guidelines cover the issues assessed in this report. These are not intended to be comprehensive guidelines, as many issue areas are not addressed. 

This third annual report builds on the framework established in the inaugural report: proxy voting and stewardship are key to reducing systemic risks, and strong proxy voting guidelines underpin the strongest strategies. This is particularly critical for universal owners invested for the long term, including pension funds. Updates to the proxy voting guidelines reflect feedback from pension staff and updated analysis from key partners. 

Updates to this year’s report better reflect best practices and global standard-setters. Most changes are clarifications and did not impact overall grades significantly for the evaluated pensions. 

• For climate resolutions, more concrete examples were provided of “specific climate actions”, including “setting a science-based decarbonization strategy, planning capital allocation aligned with 1.5°C, policies to price-in carbon, or adopt practices verified by a credible third-party.”
• International frameworks were added for nature/biodiversity and Indigenous Peoples’ Rights, including the Global Biodiversity Framework, Taskforce on Nature-related Financial Disclosures (TNFD), or the Accountability Framework Initiative (AFi). 

More information on updates and changes to the methodology, and more details on the grading rubrics, can be found here.

In addition to updating and strengthening proxy voting guidelines, pensions should: 

• Engage asset managers and proxy policy advisors to align on sustainability,
• Support public policy and legislative reforms to mitigate sustainability risks that impact portfolios, and
• Join asset owner initiatives working to address sustainability risks. 

More information on these recommendations can be found here.

Acknowledgments

The report authors would like to thank the following Sierra Club colleagues for their support, commentary, and guidance: Jessye Waxman, Ben Cushing, Cara Fogler, and Ginny Roscamp.

The report authors would additionally like to thank the following individuals for their commentary and guidance on the report’s foundational methodology: Lindsay Meiman, Ada Recinos, Richard Brooks, Ginny Roscamp, Hillary Larson, Ben Cushing, Cara Fogler, Moira Birss, Tara Houska, BankTrack, Carbon Tracker, the Climate Safe Pensions Network, Divest Oregon, First People’s Worldwide, Friends of the Earth, IEEFA, Investor Advocates for Social Justice, Majority Action, Rainforest Action Network, ShareAction, Reclaim Finance, the Sierra Club Foundation, the Sunrise Project, and the World Commission on Environmental Law.