Mobilizing Public Capital for a Sustainable Future
As climate change accelerates, finding practical solutions is more urgent than ever. Public capital—such as pension funds—is one of the most powerful yet often overlooked tools at our disposal and can be a key driver in creating the future we need.
At its core, mobilizing public capital means leveraging the financial power of these funds to fuel real change. Investing in clean energy and climate resilience can drive positive social and environmental outcomes and build a more equitable economy, filling critical gaps left by private investments. Additionally, public capital can encourage corporate accountability, promoting improved governance standards.
Why Public Capital?
Black, Indigenous, people of color, people with disabilities, lower-income families, and frontline workers bear the brunt of the impact of climate change. Yet, they are often excluded from policy-making and accountability structures. This exclusion deepens inequities and hinders effective climate action. Public pension funds, however, represent nearly $6 trillion in assets—funded by the hard-earned contributions of millions of workers—and hold a unique responsibility not only to provide secure, dignified retirements for their contributors but also to help create a world where those retirees and their communities can thrive.
Across the U.S., state public pension plans participate in blended capital projects that drive social and environmental change by combining public, private, and philanthropic funds to achieve meaningful outcomes. Examples include:
California Public Employees' Retirement System (CalPERS): Invests in green projects targeting renewable energy, sustainable infrastructure, and affordable housing utilizing public-private partnerships (P3s) involving private, government, and philanthropic capital.
New York State Common Retirement Fund (NYSCRF): Supports clean energy, affordable housing, and local business development through its In-State Private Equity Investment Program, blending state and private funds.
Teachers Retirement System of Texas (TRS): Engages in blended capital projects for renewable energy and infrastructure, often using joint ventures with public and private funding sources.
Illinois Municipal Retirement Fund (IMRF): Focuses on impact investments in affordable housing, clean energy, and infrastructure, blending funds from government and philanthropic sources.
Massachusetts Pension Reserves Investment Management (MassPRIM): Maintains a $2 billion sustainable infrastructure portfolio through co-investments with public and private entities, aiming to reduce carbon emissions and enhance portfolio resilience.
These investments exemplify how union members and leaders, CFA's core stakeholders, can direct systemic change by pushing their funds to adopt climate-conscious pension investment strategies that benefit communities.
Public employees like teachers, firefighters, and healthcare workers have fought for their pensions—now, they can press these same funds to push corporations to act on climate and worker justice.
The Power of Trustees and Shareholder Voting
Public pension trustees play a crucial role in driving capital toward climate resilience and security. Tasked with a fiduciary duty to act in the best interest of those relying on the funds, trustees are uniquely positioned to address the long-term risks of climate change and economic inequality. They can be active agents of change, ensuring that public pension investments align with sustainability goals, influencing corporate behavior through shareholder voting, and advocating for broader systemic change beyond passive caretaking to support responsible business practices.
Ultimately, trustees can ensure investment policies reflect the fund's duty to current and future beneficiaries and demand actions to safeguard pension funds' financial health and integrity by calling for clear climate risk metrics and assessments, introducing expert advisors in climate risk management, and aligning investments with long-term sustainability.
Shaping Corporate Behavior
One of the most effective ways public capital can drive change is by influencing corporate policies. U.S. public pension systems own a hefty number of company shares. Those shares mean votes– and a powerful opportunity to harness the power of pension dollars to advance more responsible corporate behavior on climate change.
Let's break down how:
When you own stock in a company, you are a shareholder with a "share."
Every share owned comes with a vote in the company, which is made through "proxy voting" at the annual meeting. The more shares you own, the more votes you have.
Since pension funds may directly own a significant number of company shares, they can exert influence. Above all, these asset owners can use their decisions to declare their values and beliefs and influence external investment managers the funds hire. So, their voting power matters and can make a difference.
This active engagement is a key element of pension systems' fiduciary responsibility, protecting the fund's resilience and ensuring the companies they invest in act responsibly. This includes limiting risk to the company's ongoing success– essential to the pension funds' long-term returns and mitigating climate impacts on the overall economy and society. Through shareholder advocacy and proxy voting, pension funds can push corporations to adopt more sustainable practices, improve transparency, and take responsibility for their environmental and social impacts. This approach addresses climate risks and fosters long-term value creation that benefits the economy and the planet.
Harnessing the Potential of Public Pension Funds
Now is the time to mobilize public capital for good. Pension trustees, public employees, and climate justice advocates can collaborate to shape an inclusive economy that benefits everyone—prioritizing sustainability, workers' rights, and climate resilience.
