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Most major US public pensions are failing to make investments that help reduce emissions and protect their members’ retirement savings from rising climate risks, according to a report by the Sierra Club.
The environmental group found that most pensions lack clear targets, credible definitions or transparent disclosures which show how their investments help finance low-carbon infrastructure and reduce climate-related financial risks.
“When pensions make splashy commitments around scaling climate solutions that don’t translate into meaningful real world change and impact it undermines their credibility, but more importantly it does not translate into the real world impact that is needed to reduce their risk and protect their pension beneficiaries,” said Ben Cushing, director of the sustainable finance campaign at the Sierra Club.
Pressure is mounting on pension funds to take more account of climate change risks, with campaigners calling on trustees to make sustainable investment decisions and use their voting power to push companies they invest in to go green.
US and Canadian pension fund returns could fall up to 50% by 2040 if predictions for the worst global warming materialise and if the current approach to climate policy doesn’t change, according to analysis by Ortec Finance, a provider of technology and risk management solutions for financial institutions.
‘Abdication of fiduciary duty’
The Sierra Club evaluated 29 US public pension systems and one permanent fund, representing approximately US$3.25tn in assets, on whether they have clear policies for directing capital toward credible climate solutions that reduce real-world emissions.
Only four of the 30 pensions assessed earned a “strong” score for their climate-solutions investing strategy: the Minnesota State Board of Investment, the New York City funds overseen by the city comptroller, the New York State Common Retirement Fund, and the Oregon Public Employees Retirement Fund. However, 22 of 30 pensions received “weak” or “no policy” scores for climate-solutions investing, indicating no defined plan to invest in climate solutions.
The Sierra Club last year welcomed the announcement by New York City comptroller Brad Lander recommending that three of the city’s pension systems re-evaluate their mandate for BlackRock to manage more than $42bn, due to the asset manager’s inadequate decarbonisation plans.
US president Donald Trump’s hostility to climate issues has made financial institutions more hesitant to take action on green issues. The Trump administration has said it will abandon a rule implemented by the previous administration that allowed pension funds to consider ESG factors and other “collateral benefits”.
Some big pension funds are still taking more action on climate despite Trump’s hostility to ESG, although some companies are backtracking on climate commitments as the Securities and Exchange Commission moves to ditch disclosure requirements.
“Pension trustees, state treasurers and the leaders of these funds need to take actions that are grounded in their fiduciary duty and responsibility, and that means making decisions that are in the best long-term interest of their beneficiaries. To not do so because of political pressure would be an abdication of their fiduciary duty,” Cushing said.
As the US federal government rolls back its green policies, some states are taking up the fight against climate change. Two bills reintroduced in New York’s senate would require climate disclosure rules similar to those adopted by California in 2023.
Cynthia Hanawalt, director of climate and business law at the Sabin Center for Climate Change Law at Columbia University, said the Sierra Club was right to highlight the significant long-term financial risk of climate change to people’s retirement savings. She noted that laws vary from state to state, so that the fiduciary obligations of pension fund managers vary too.
“Pension fund managers often have flexibility to address climate risk, depending on their state’s trust law. As seen in New York, there is a significant opportunity for fund managers to take a leadership role in identifying and managing climate risk, before it leads to losses to state employees’ retirement funds,” she said.
“Hopefully the report will prompt pension fund managers to deploy all their available tools to get ahead of climate-related losses while they still can.”
Less greenwashing, more ‘greenhushing’
Even though some US states have adopted laws that restrict companies taking ESG factors into account, Cushing said most states had not adopted such policies so pension funds needed to take the issue more seriously.
He said pension funds need to set clear time bound targets and goals for scaling investments in credible climate solutions. They must also adopt credible definitions and guardrails for climate solutions in their investment portfolios, and also adopt or strengthen governance and transparency around those investments.
The California Public Employees’ Retirement System (CalPERS), the largest US public pension, has said it reached $60bn in “climate solutions” investments, but the Sierra Club said questions remain around what is included after it was revealed that CalPERS counted investments in the world’s largest oil and gas companies.
Cushing noted that some companies have continued their green transition efforts without publicly talking about it, a phenomenon known as greenhushing.
“In this political climate we are also seeing a number of companies really shying away from talking about their sustainability strategies and goals,” he said. “It certainly can pose a challenge in this context for investors to figure out which companies are pursuing transition plans and decarbonisation strategies,” he said.
“Paradoxically there is perhaps also a benefit from an investor perspective in the sense that there is less greenwashing going on.”
This page was last updated January 22, 2026
Written by
Emma Thomasson is a British journalist, consultant and trainer based in Berlin. She is an expert in economics, politics, business and technology. She previously worked for Reuters as a correspondent and bureau chief in Germany, Switzerland, the Netherlands, South Africa and the UK.
