Most US public pension funds are failing to adequately manage the climate-related financial risks to their investments through proxy voting, a new report by Sierra Club has suggested.
According to the report, The Hidden Risk in State Pensions: Analyzing US Public Pensions’ Responses to the Climate Crisis in Proxy Voting, by not utilising proxy voting as a tool to manage climate risks, pension funds are putting their long-term portfolios at risk, and undermining retirement security.
Portfolio risk
“Even as political and regulatory headwinds led to fewer climate-related shareholder proposals reaching the ballot in 2025, the risks to pension portfolios have not changed,” commented Allie Lindstrom, senior strategist, Sustainable Finance Campaign, Sierra Club.
“As proposals decline, director votes are becoming an increasingly important, but still underutilised, tool for maintaining support for corporate climate action. We urge public pensions to escalate their use of director accountability to push companies toward credible, science-based transition plans.”
The report assessed the proxy voting guidelines, 2025 proxy voting records, and voting transparency of 33 of the largest and most influential public pension funds in the United States. This included pensions in New York City, Los Angeles County, and the University of California, and state-wide schemes in Arizona, California, Colorado, Connecticut, Florida, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Tennessee, Texas, Vermont, Virginia, Washington, and Wisconsin.
Oversight failures
As it found, while climate-related shareholder proposals fell last year, influenced by political and regulatory changes, a growing trend of investors are willing to hold corporate boards of directors accountable for oversight failures.
It also identified a clear link between strong proxy voting commitments and support for climate-related measures, with funds boasting clearer policies more likely to back climate risk management.
The Sierra Club assigned a score to each pension fund, in terms of how climate risks are addressed therein, with just four – Massachusetts Pension Reserves Investment Management (PRIM), New York State Common Retirement Fund (NYSCRF), three New York City pensions (NYCERS, TRS, BERS), and Vermont Pension Investment Commission (VPIC) – receiving an ‘A’ ranking.
In terms of the next steps, the report urges US pension funds to ‘update their proxy voting guidelines to reflect evolving best practices, including requiring corporations to reduce real-world emissions over increased climate disclosures; strengthen their policies on board of director accountability on climate; strengthen their policies on biodiversity, human rights, Indigenous rights, just transition, and environmental justice; and add explicit language to protect beneficiaries’ savings from climate-related risks’. Read more here.
