The Climate Solutions Gap: An Assessment of U.S. Public Pensions’ Investment Strategies

Assessment of Major U.S. Pensions’ Approach to Climate-Solutions Investing

Key Takeaways: Policies & Commitments

Few Funds Have Robust, Impactful Climate-Solutions Strategies

A small group of funds is beginning to integrate climate-solutions investing into their strategies, but most have a long way to go. Despite growing awareness of climate risk, most funds have yet to adopt clear, proactive investment strategies that direct meaningful capital toward credible climate solutions and avoid greenwashing.

Twenty-four of the 30 funds had no discernible net-zero commitment. Among the remaining six, three received a “developing” score because their commitments lack one or more essential elements, such as a science-based target, Scope 3 emissions coverage, or a clear implementation plan. Only three funds earned a “strong” score for their net-zero commitment: the California Public Employees’ Retirement System (CalPERS), three of the funds overseen by the New York City Comptroller (NYCERS, BERS, and TRS, referred to collectively as the NYC funds), and the Oregon Public Employees Retirement Fund (Oregon PERF).

Twenty-two of the 30 funds lacked a defined climate-solutions investing strategy, receiving either a “weak” or “no policy” score in that category. Of the eight that did, four received a “developing” score for lacking time-bound, numeric targets, limiting the strategy to certain asset classes, or failing to prioritize real-economy decarbonization. Only four funds earned a “strong” score on their climate-solutions investing strategy: the Minnesota State Board of Investment (SBI), the NYC funds, the New York State Common Retirement Fund (NYSCRF), and Oregon PERF. 

CalPERS, for example, received a “developing” score for its climate-solutions investing strategy because it focuses on achieving a 50% reduction in portfolio emissions intensity by 2030, which does not necessarily drive real-world emissions reductions. In addition, a separate analysis of what CalPERS has counted toward its 2030 climate-solutions target shows it includes billions of dollars in holdings in some of the world’s largest oil and gas companies and other major emitters. This indicates that CalPERS’ approach lacks strong definitions and guardrails to ensure its investments in “climate solutions” contribute to real-world emissions reductions.

These results highlight that even among funds showing relative leadership, most have only partial or preliminary strategies for investing in climate solutions. Few have adopted the comprehensive, actionable approaches needed to drive real-world emissions reductions and mitigate systemic climate risk.

Lack of Clear Targets for Climate-Solutions Investments 

While a growing number of public pensions are actively pursuing investments in climate solutions, their strategies vary significantly in clarity and rigor. Only five of the 30 systems have established explicit targets for allocating investments to climate solutions: CalPERS, Minnesota SBI, the NYC funds, New York SCRF, and Oregon PERF. 

Several others — Los Angeles County Employees Retirement Association (LACERA), New Mexico State Investment Council (NMSIC), and Seattle City Employees’ Retirement System (SCERS) — have disclosed strategies for climate-solution investments, but lack measurable targets to guide or scale these investments.

Other pensions disclose holdings that may qualify as climate solutions, but these exposures appear to result from broad portfolio diversification rather than from a deliberate, targeted strategy. These include the California State Teachers’ Retirement System (CalSTRS), Connecticut Retirement Plans and Trust Funds (CRPTF), New Jersey State Investment Council (NJSIC), and Vermont Pension Investment Committee (VPIC). Without a stated strategy or target, there is no clear indication these pensions are proactively making new investments in climate solutions.

Ambition and Credibility of Investment Targets Vary Widely

Among the five funds with climate-solutions investment targets, the scale and share of asset allocations vary substantially (AUM figures reflect 2025 values):

• CalPERS: $100 billion by 2030 (~18% of AUM)
• NYC funds: $50 billion by 2035 (~18% of AUM)
• New York SCRF: $40 billion by 2035 (~15% of AUM)
• Oregon PERF: $6 billion by 2035 (~6% of AUM)
• Minnesota SBI: $1 billion by 2029 (~0.75% of AUM)

These differences reflect varying levels of ambition and different views on the role of climate-solutions investing in managing systemic climate risk and capturing long-term opportunities. But scale alone does not determine credibility. What counts toward these targets varies significantly in quality.

Some funds include investments that simply involve buying existing assets, which does not provide new financing for climate solutions, and therefore does not reduce real-world emissions or systemic climate risk. Others count “low-carbon” or “climate-aligned” investments that may consist primarily of already decarbonized companies or low-emitting sectors, where additional real-world impact is limited.

Several funds also include investments that raise concerns about misclassification or greenwashing. For example, CalPERS counts certain public-market holdings in major oil and gas companies toward its $100 billion climate-solutions target, and the NYC funds include carbon capture and storage (CCS), a technology whose deployment and emissions-reduction outcomes remain uncertain without strong guardrails.

These examples underscore the importance of clear definitions and guardrails. Without consistent criteria — such as those outlined in the Principles for Climate Solutions Investments — climate-solutions targets can overstate their contribution to decarbonization and risk reduction, weakening both their credibility and effectiveness.

Climate-Solutions Investing Mainly Focuses on Clean Energy 

The assessment reveals a pronounced skew in how funds are approaching climate-solutions investing. Encouragingly, ten funds earned “developing” scores in the clean energy category, though none received a “strong” score. These include CalPERS, CalSTRS, Los Angeles CERA, Minnesota SBI, New Mexico SIC, the NYC funds, New York SCRF, Oregon PERF, Seattle CERS, and Vermont PIC.

However, funds’ strategies notably drop off in other categories that are also crucial for mitigating climate risks. No fund received a “strong” score in any other categories, and few received even “developing” scores:

• Nature and Biodiversity: Nine funds received “weak” scores, and the vast majority had no policy.
• Just Transition: Only three funds — CalPERS, NYSCRF, and the Maryland State Retirement and Pension System (MSRPS) — received “developing” scores; six received “weak” scores, and the rest had no policy or anti-ESG restrictions.
• Climate Resilience: Only two funds — CalPERS and the NYC funds — received “developing” scores, four received “weak” scores, and the rest had no policy.

This distribution suggests that even the more advanced funds continue to treat climate solutions primarily as an energy-sector issue. Clean energy investments are vital, but mitigation is needed across many sectors, along with investments in climate resilience and just-transition strategies. The analysis shows that pensions need a more comprehensive approach to invest in climate solutions to effectively address climate-related financial risks.

Key Takeaways: Governance & Disclosures

Governance Is Improving but Remains Uneven

The assessment shows that board-level oversight of climate-related investment strategy is becoming more common, but remains inconsistent. Many funds appear to still be in the early stages of treating climate risk as a core investment governance issue rather than a peripheral consideration. Weak oversight structures make it difficult for fiduciaries to fulfill their duty to identify and manage climate-related financial risks, thus increasing the likelihood that material risks will go unaddressed.

About two-thirds of the funds received at least some score (“strong”, “developing”, or “weak”) for board-level climate oversight. Eight funds received “strong” scores, reflecting regular board engagement and clearer assignment of responsibility for climate-related investing strategies: CalPERS, CalSTRS, Los Angeles CERA, Maine PERS, Washington SIB, Seattle CERS, the NYC funds, and New York SCRF.

Several pension funds — Colorado PERA, Delaware PERS, Hawaii ERS, Illinois TRS, and NYSTRS — received “weak” scores, indicating that their boards either lack clear responsibilities for ESG or climate-related oversight, or only have broad policies allowing ESG considerations without requiring them. Several funds have no policy at all for climate governance, while the selected systems in Florida (SBA), Texas (ERS), and North Carolina (NCRS) are constrained on climate risk oversight by anti-ESG laws.

In several cases (notably Massachusetts PRIM and Vermont PIC), climate-related oversight is confined largely to stewardship and proxy voting. While these are important tools, they are insufficient on their own to mitigate systemic climate risk and protect long-term portfolio value.

Progress Reports Often Lack Crucial Detail

Regular progress reporting is essential for credible climate-strategy implementation. It enables fiduciaries, beneficiaries, and the public to understand whether commitments are being met and whether climate-related financial risks are being effectively managed.

Only four pension systems scored “strong” on climate progress reporting: CalPERS, CalSTRS, the NYC funds, and NYSCRF. A broader set of funds publishes some climate-related updates, but these were scored “developing” or “weak” because they provide limited detail on climate-solutions investments or lack consistency over time. The remaining funds provide no climate progress reporting at all.

Even among funds with better reporting, disclosures about climate-solutions investments are often insufficiently detailed to evaluate strategy effectiveness. The lack of information on what investments count as climate solutions, whether allocations are increasing, and whether they meet credible criteria — such as those outlined in the Principles for Climate Solutions Investments — limits the ability to assess whether funds are making meaningful progress toward mitigating climate-related financial risks.

Holdings Disclosures Remain Very Limited

Holdings-level disclosures are essential for determining whether pension funds are directing capital toward credible climate solutions and avoiding investments that may undermine climate goals or increase portfolio risk.

Across the sample, none of the funds scored “strong” on climate-solutions holdings disclosures. Nine funds scored “developing” because they offer only partial visibility into relevant holdings: Oregon PERF, Washington SIB, New York STRS, Connecticut RPTF, Delaware PERS, Hawaii ERS, CalPERS, CalSTRS, and Vermont PIC. Many others provide only “weak” disclosures or none at all.

Where holdings disclosures do exist, they are often incomplete, inconsistent over time, or limited to certain asset classes (typically public equities). Most funds disclose standard holdings more thoroughly than climate-solutions holdings, and information on private-market climate investments is particularly scarce. Without clear, comprehensive data, it is difficult to assess whether reported climate-solutions investments meet credible definitions and guardrails or whether some may be misclassified or marginal.

This lack of transparency makes it difficult for beneficiaries, policymakers, and the public to verify whether funds are meaningfully directing capital to credible climate solutions, or merely counting non-strategic or misclassified investments toward their stated strategies or targets.