Pension Funds Push Forward on Climate Goals Despite Backlash

In the past few months, some of the largest banks and asset managers in the United States have quit net zero networks, the climate groups that encourage their members to set ambitious carbon reduction targets and collaborate internationally on sustainability efforts.

But the week after Donald Trump won reelection in November, NYCERS, a pension fund for New York City employees, went in the opposite direction. It joined a United Nations-affiliated climate action group for long-term investors, the Net Zero Asset Owner Alliance.

The timing wasn’t intentional, said Brad Lander, the comptroller who oversees the city’s finances, including the pension fund, and is now running for mayor. But, he added, “we were pleased that the timing sent an important signal.”

“It is far more important than it was for pension funds and other big asset owners to take collective action at this moment,” Lander said.

At a time of growing backlash to environmental, social and governance goals and investment strategies, pension funds, particularly in blue states and Europe, have emerged as a bulwark against efforts to sideline climate-related risks.

The funds, which sit at the top of the investment chain, have stepped up engagement with asset managers and companies on climate goals and have kept public commitments to use their fiscal might to reduce carbon emissions. In some cases, that has meant shifting to European asset managers, which have not backed off on climate commitments as much as their American counterparts have.

Lander’s office oversees investments for five public pension funds for 700,000 of the city’s current and former employees. The funds are pushing ahead with engagement, bringing more shareholder resolutions to banks to disclose the ratio of their fossil fuel investments versus clean energy and to utilities companies on their climate targets.

They have been emboldened by a court decision in March that upheld a dismissal of a lawsuit against three of the funds for divesting from some fossil fuel investments.

Lander and other pension fund managers say they aren’t motivated by political beliefs or a purely environmental agenda. Instead, their investments, which need to provide long-term sustainable returns for people who might not retire for many decades, keep climate risks at the forefront of their minds.

The net zero alliance is “the opposite” of an activist, Peter Stensgaard Morch, CEO of PensionDanmark and a member of the alliance’s steering group, said in a written response to questions. Its work is driven by the fiduciary duty of its members to seek the highest possible returns, he added.

Recent actions by pension funds stand in contrast with those of other institutions that are loosening their climate commitments. A net zero group for banks is considering dropping the pledge to align banks’ portfolios with a goal of limiting global warming to 1.5 degrees Celsius. Some big energy companies, such as BP, have pared back their renewable investments. In February, the European Commission proposed relaxing climate reporting rules for companies, citing concerns that the regulation was too onerous and would impede economic growth.

The U.N. asset owner group, which includes pension funds, insurers, foundations and other long-term investors, has fared better than its counterparts. Asset managers, who are in a tug of war between customers in blue and red states, have pulled out of previous public commitments to climate goals. The U.N. group for asset managers, which used to include BlackRock, has suspended its activities, and the group for banks lost 17 big members in the past four months.

Intense political and legal attacks in the United States, notably from red states with anti-ESG laws, have pressured asset managers to abandon climate action groups and simultaneously widened the chasm between Europe and the United States on sustainability efforts.

The People’s Pension, a British fund that has about 32 billion pounds ($41 billion) in assets and manages pensions for nearly 7 million people, recently shifted most of its assets away from State Street, the U.S. firm that was its only asset manager, to Amundi, a French company, and Invesco. The fund was seeking more asset managers with strong sustainability credentials in line with its own responsible investment commitments, said Dan Mikulskis, chief investment officer.

“We don’t interact directly with companies,” Mikulskis said. “We rely on asset managers to do that for us.”

During the search, which lasted about a year, asset managers started to go “different ways” from one another, as he diplomatically put it. But that made it easier to determine those with the right approach for his fund.

Recently, a group of 27 pension funds, mostly from Europe, called on asset managers globally to improve their stewardship practices to address climate change risks and to stay in collaborative groups. They noted there had been a “divergence” between the expectations of asset owners and the actions of asset managers on climate stewardship.

This was backed up by a study by Principles for Responsible Investment, which found that among its 3,000 or so signatories, asset owners were much more likely to take a long-term approach to identifying climate risk and to use climate scenario analysis than the asset managers to whom they outsourced investing.

Progress by some companies on climate action is slowing amid short-term pressure, such as a rise in energy prices, said Diandra Soobiah, the head of responsible investment at Nest, a British state-backed pension fund with 48 billion pounds ($62 billion) in assets.

“These pressures have had an impact, but what we are trying to do as long-term investors is really talk about the importance in managing these long-term risks,” she said. “We still believe the world is going to have to transition, and want them to be prepared.”

c.2025 The New York Times Company. This article originally appeared in The New York Times.