Second Annual Report Analyzes Major Public Pensions’ Responses To The Climate Crisis In Proxy Voting

Report ranks 32 of the largest and most influential pensions in the U.S.

February 10, 2025

The second-annual report "The Hidden Risk in State Pensions: Analyzing U.S. Public Pensions' Responses to the Climate Crisis in Proxy Voting"from Sierra Club and Stand.earth analyzes proxy voting guidelines, 2024 proxy voting records, and voting transparency of 32 public pension funds collectively representing over $3.8 trillion in assets under management (AUM). Learn more: What is proxy voting?

• Read the report: https://www.sierraclub.org/sites/default/files/2025-02/hidden-risks-state-pensions-report.pdf

While last year's reportfocused on self-identified climate leaders, this latest version looks at the proxy voting records and guidelines of the largest and most influential public pension funds in the U.S. This broadened scope includes county and city pension funds, as well as pension funds located in states restricting Environmental, Social, and Governance investing through "anti-ESG" legislation and executive actions.

The pensions analyzed include the pensions for New York City, Los Angeles County, and the University of California, and pensions in the following states: Arizona, California, Colorado, Florida, Illinois, Indiana, Maine, Maryland, Massachusetts, Michigan, Minnesota, Missouri, Nevada, New Jersey, New York, North Carolina, Ohio, Oregon, Pennsylvania, Texas, Vermont, Virginia, Washington, and Wisconsin.

"As long-term investment fiduciaries, pension funds should be among the institutions most alarmed about the economic risks associated with the climate crisis. Some have taken public strides forward, such as announcing net-zero pledges, investing in climate solutions, or defending the right to invest responsibly. These are critical steps forward. However, as this report shows, the institutions responsible for stewarding trillions of dollars on behalf of the American people fail to match that record with strong standards to address climate-related financial risk in their proxy voting strategies," reads the report.

KEY FINDINGS

• The leading pension funds continue to strengthen their proxy voting guidelines each year and pull away from the laggards. Over the last year, two pension systems - the Massachusetts Pension Reserves Investment Management (MassPRIM) and the Connecticut Retirement Plans and Trust Funds (CRPTF)- approved new guidelines on biodiversity, board of director accountability, and human rights.
• 8 pensions in "anti-ESG" states scored lower than their peers, but a number of pensions with no such legal restrictions had only minimally better guidelines in place. The non-participation of these two groups limits the overall effectiveness of shareholder engagement.
• MassPRIM was the only pension to receive an "A" grade.
• 9 pensions received "B" or "C" gradesfor having transparent voting records and good-to-moderate proxy voting guidelines, which led to good proxy voting outcomes.
• 14 pensions received "D" or "F" gradesfor having transparent voting records but moderate-to-poor proxy voting guidelines, which led to poor proxy voting outcomes.
• 8 pensions received "Incomplete" gradesfor failing to disclose their voting records.

"The findings of this analysis are clear: while some states are beginning to use proxy voting as an effective risk management tool, far too many state pensions are still failing to take adequate steps to address climate-related financial risks and protect their members' hard-earned savings, raising serious concerns about the execution of their fiduciary duty - the obligation that institutional investors have to act in their clients' or beneficiaries' best interest," reads the report. "In order to help mitigate systemic risks like climate change and protect beneficiaries' interests, the pensions analyzed in this report should update and strengthen their proxy voting guidelines and use those guidelines to direct their voting practices in 2025 and beyond."

QUOTES FROM AUTHORS

Allie Lindstrom, Senior Strategist, Sustainable Finance Campaign, Sierra Club:

"This report offers pragmatic, tangible guidance for public pensions to address the financial risks climate change poses to workers' savings. Despite the fossil fuel industry's ongoing attacks on responsible investing, more pension fund leaders are recognizing that climate change threatens to destabilize our entire economy. But they must do more to mitigate this enormous risk. To ensure they can meet their obligations to protect retirees' hard-earned money for decades to come, pensions must strengthen their proxy voting strategies to hold corporate polluters accountable and support climate progress."

Amy Gray, Associate Director of Climate Finance, Stand.earth:

"This report is a stark reminder that pension funds can - and must - do so much more to wield their massive investor power. As investors on the longest-term horizons, pensions must read the writing that's been on the wall for decades: live up to their fiduciary duty, and protect pensioners and climate alike through updated proxy voting guidelines, and voting in line with climate and human rights. It is disappointing to see so many funds not accessing such a powerful strategy to defend climate and the working class communities they serve."

NOTES TO THE EDITOR

An analysis of each pension's data was sent to all pension fund managers, and they were given the opportunity to provide feedback.

The report is endorsed by the Intentional Endowments Network, Public Citizen, Americans for Financial Reform Education Fund, Rainforest Action Network, Friends of the Earth U.S., Reclaim Finance, Stop the Money Pipeline, ClimateVoice, and Market Forces, among other organizations.

About the Sierra Club

The Sierra Club is America's largest and most influential grassroots environmental organization, with millions of members and supporters. In addition to protecting every person's right to get outdoors and access the healing power of nature, the Sierra Club works to promote clean energy, safeguard the health of our communities, protect wildlife, and preserve our remaining wild places through grassroots activism, public education, lobbying, and legal action. For more information, visit www.sierraclub.org.

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