A stewardship-focused approach to climate change emphasizes the importance of achieving long-term sustainable returns.

States’ Expansion of its Capacity for Sustainable Investing 

This update outlines recent developments in 2023 and 2024 that pension funds have made to expand their ability to manage systemic risks and opportunities. It highlights personnel changes, legislative actions, and policy shifts that deepen the commitment to stewardship and sustainability. This reflects a significant shift to responsible investing and acknowledges the challenges of climate change.

Why this matters: Climate change presents substantial financial risks. A stewardship-focused approach enhances risk management and emphasizes the importance of achieving long-term sustainable returns, which are essential for the viability of pension funds and the financial security of workers’ retirement savings. This approach is an opportunity for stakeholders within the pension system to advocate for responsible investing practices, both in their pension fund and within the wider investment community.

California

    • In 2023, CalPERS committed to boosting its sustainability staff.

    • LACERA added an experienced corporate governance professional, with leadership experience in proxy voting, investor relations, and investor engagement.

    • CalSTRS made Netw Zero transition commitments with specific goals and is bringing in a “transition tracker” and other resources to equip the fund to meet its commitments.  ption text goes here

    • California Senate Bill 253. Senate Bill 253 Mandates climate-related disclosures for public and private companies doing business in California.

    • California Senate Bill 261. Senate Bill 261 applies to businesses with annual revenues over $1 billion and requires them to disclose their Scope 1, 2, and 3 greenhouse gas (GHG) emissions annually.

    • In 2023, CalPERS adopted and began implementing Labor Principles. 

    • LACERA commits to acting on the systemic risk of climate change, and updates its proxy voting guide to include director votes. This commitment to managing systemic risk throughout its entire portfolio equips the fund to address a fuller range of risk factors and risk-reduction opportunities. 

Colorado

2023, SB 23-016 passed - a wide-ranging bill that strengthens Colorado’s commitment to cut statewide climate pollution beyond 2030. It would put new targets in law requiring economy-wide emissions cuts of at least 65% by 2035, 75% by 2040, 90% by 2045, all below 2005 levels, and strengthen the state’s 2050 target to achieve net-zero greenhouse gas emissions by 2050.

Illinois

  • Treasury built its sustainable investing team with new hires including Deputy Director of Corporate Governance and Sustainable Investment and a Director of Public Assets.

    • In 2023, 30 ILCS 238/ Illinois Sustainable Investing Act. A public agency shall prudently integrate sustainability factors into its investment decision-making, investment analysis, portfolio construction, due diligence, and investment ownership in order to maximize anticipated financial returns, minimize projected risk, and more effectively execute its fiduciary duty.

    • In 2023, adjustments around biodiversity, governance, and a specific call out for climate classifying it as a systemic risk in its Updated Proxy Voting Guidelines

    • In 2024, HB 2782, Consideration of ESG Factors, requires public entity investment managers to disclose any process through which they integrate sustainability factors into investment decision-making, analysis, portfolio construction, diligence and investment ownership to maximize risk-adjusted financial returns. 

Massachusetts

  • MassPRIM built out governance staff and created a new position, Director of Stewardship, that reports to the Deputy Chief Investment Officer.

    • MassPRIM updated its structure for its ESG Committee, now known as the Sustainability and Stewardship Committee chaired by the state treasurer.

    • In 2023, MassPRIM ESG Committee proposes Stewardship Principles.

Maryland

    • The State Comptroller’s office added two positions, climate resilience director and investment research officer. 

    • MSRPS hired a Senior Governance Manager in late 2022, and is rehiring for the position to start again in 2025. 

    • MSRPS adds a DEI Director to advance diversity and equity in its investments, asset management, and stewardship. 

    • The fund is adding a Climate Risk Advisory Panel, bringing additional expertise and capacity to the fund’s staff and board on risk management and identifying opportunities.

    • The Maryland State Retirement Pension System (MSRPS), completed its Risk Assessment Study February of 2023. (This was sparked by the 2022 House Bill 740 State Retirement and Pension System – Investment Climate Risk – Fiduciary Duties, requiring a fiduciary of the State Retirement and Pension System to consider certain climate risks on the assets of the several systems to ensure a long–term sustainable portfolio.)

    • In 2024, HB1212 is signed into law to allow the State Retirement Agency to hire someone to fulfill a DEI role in the retirement and pension system.

Minnesota

  • The fund has added two new positions to strengthen its investment stewardship team.

  • The fund’s 2024 Climate Roadmap (pg 54) and updated Investment Beliefs Statement (pg 96) to recognize systemic risk sets it up for bringing in external expertise to boost its risk analysis, climate solutions investing, and corporate engagement.

New Mexico

New Mexico State Investment Council (NMSIC) sets a pledge to preserve, diversify, provide transparency and grow the assets placed under management to enrich lives of all New Mexicans. NMSIC’s new vision and mission will guide its investment philosophy and policy, adding significant value to New Mexico’s portfolios through the diversification of staff, consultants, investments, and money managers with the intent of navigating risk and yielding stronger returns.” This sets the stage for the fund to expand its capacity and responsibility for more robust stewardship.

New York City

The fund added an economist to its Bureau of Asset Management. The Bureau of Asset Management advises the Boards on all investment-related topics, including investment policy and strategy, asset allocation, manager structure, manager selection, and financial and economic developments that may affect the systems. 

New York State

State Pension Fund set a 2040 Net Zero Carbon Emissions Target New York State Common Fund adopted a goal to transition its portfolio to net zero emissions by 2040, including (i) a review of investments in energy sector companies, (ii) an assessment of transition readiness and climate-related investment risk and (iii) divestment of companies that fail to meet minimum standards.

Oregon

Washington

    • The Treasury created a new position through a 2022 budget provision and hired an ESG policy analyst. 

    • The Washington State Investment Board added a second corporate governance position. 

    • The fund also added a Government and Public Affairs Director, responsible for working with state and federal legislators, government officials, state agencies, and labor unions.

  • Policy updated of 2022 Washington State Investment Board-issued Climate Change Blueprint: Nationally and in Washington State outlined in 2024 Sustainability Report and includes expanded education for the board and staff, assessments and reporting, augmenting data frameworks for greater risk analysis.

Related Resources

  • Checklist for Policy Implementation and Accountability

    When a pension fund improves its policies and principles to understand better and limit climate risk, it is setting itself up for much stronger long-term health, financial sustainability, and security of public workers’ retirement futures. Discover eight questions to see if your fund is setting itself up for climate risk policy implementation and accountability. Download.

  • Snapshot of Climate Investments by US Pension Funds

    See how public pension funds are incorporating climate considerations into their investments to enhance long-term financial health and sustainability. Take a closer look at key examples of climate-aligned strategies, equipping pension stakeholders with insights into supporting climate resilience and responsible financial stewardship. Download.

  • Menu for Change: 10 Policy Paths Pensions Can Take To Tackle Climate Risk

    Discover ten common ways your pension can better tackle the impact of climate risk and corporate unaccountability on the fund's health, including expanding climate risk analysis tools and scenarios, strengthening proxy voting, and establishing a formal ESG committee. Download.

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