Reflection on Shared Power: Bridging the Gap in Pension Governance
At Climate Finance Action (CFA), we work to equip stakeholders and decision-makers to leverage the transformative power of publicly held capital for a fair economic transformation that benefits people and the planet. As we engage with union leaders and members, policymakers, and labor representatives, one challenge remains central to our conversations: the balance of resources between those who make investment decisions and the workers whose futures are directly impacted by them.
The climate crisis is not a distant threat—it’s a present reality affecting workers across industries, from those exposed to extreme heat on job sites to retirees whose pensions depend on the long-term stability of our financial systems. With nearly $6 trillion in worker retirement investments, public pensions have the power to drive meaningful climate action, and workers hold the power to demand corporate accountability to drive climate-conscious, responsible investment strategies.
Workers—who contribute to and rely on these pension funds—deserve a stronger voice in how their retirement savings are invested. They are not just beneficiaries but stakeholders with a vested interest in ensuring that their pensions are protected from climate-related financial instability. However, they often find themselves excluded from key investment and stewardship decisions due to governance structures that concentrate power among financial professionals and policymakers.
The Power Dynamic in Pension Governance
Public pension fund managers and investment professionals regularly receive extensive training, industry insights, and access to high-level networks. This ensures they have the tools to make financial decisions that often prioritize market performance over the long-term well-being of workers. Meanwhile, union leaders and members—those whose futures depend on these investments—are often left without the knowledge or influence to challenge or guide investment strategies that align with their interests.
Public pension funds are meant to serve workers, yet fiduciary duty is frequently cited as a reason to maintain the status quo, even though it is increasingly evident that failing to mitigate environmental and social risk in financial planning is itself a breach of fiduciary responsibility.
This gap between existing investment strategies and the growing worker support for responsible investment strategies—particularly related to issues such as affordable housing and climate risk—creates a power imbalance. Workers are expected to trust in the stewardship of pension funds without having equal influence to challenge or shape those decisions. With the current uncertainties surrounding policies and corporate governance measures, we must continue to consider and broaden our vision for what a shift in resources and education toward the most affected—the workers and retirees—can look like in a fair economic transformation. Sharing power requires trust, and trust is built through transparency and inclusion.
Resource Allocation as a Tool for Climate Action
If pension funds are serious about mitigating risk, they must allocate resources equitably to decision-makers and workers. This means:
Providing education and capacity-building for worker representatives on pension boards, ensuring they have the tools to advocate effectively for investment strategies that mitigate social risk and align with worker values.
Shifting resources away from climate-harming investments and toward sustainable infrastructure, climate resilience projects, and worker-friendly investments that create jobs while ensuring long-term value rather than solely seeking short-term returns.
Increasing transparency and accessibility so workers and their unions can engage meaningfully in investment decisions and hold decision-makers accountable.
An Ethical Transformation Requires Shared Power
The transition to a low-carbon economy must be just—ensuring that workers are protected from the worst effects of climate change and positioned to benefit from the new jobs and opportunities that climate-conscious investments create. Achieving this requires pension fund governance structures that recognize workers as partners, not passive recipients of decisions made on their behalf.
This power shift won’t come from the top down; it must be built from the ground up. While we often look for champions in pension boards or progressive investment professionals, history shows that lasting change comes from collective action.
At CFA, we are committed to ensuring that workers have the knowledge, influence, and power to shape the future of their pensions. The question now is: how do we move from awareness to action? It starts with shifting resources, building collective power, and holding decision-makers accountable.
