2025 has been a challenging year for climate action. In the U.S., the federal government rolled back climate protections and slashed support for clean energy, even as a wave of climate-fueled disasters underscored the mounting economic toll of a warming world. The first half of 2025, including devastating fires in southern California, was the costliest on record for major U.S. disasters. Local governments are struggling to rebuild, while insurance, electricity, housing, and other essentials become increasingly unaffordable.
Climate change is no longer a distant threat. It’s making everyday life harder and more expensive, and the financial risks to people’s retirement savings will only deepen without strong, swift action.
At the same time, much of the financial sector moved backward. Fossil fuel financing climbed, major banks and asset managers abandoned net-zero alliances, and some firms scrapped their climate targets — not because risks diminished, but due to political pressure and short-term profit motives. Federal financial regulators that are supposed to be independent from political upheaval also reversed preliminary measures that would have increased transparency and accountability for escalating climate-related financial risks.
Yet one crucial part of the financial system moved in a different direction: pension funds and other long-term owners of the trillions of dollars that underpin the global economy.
As the New York Times put it, “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.”
The Financial Times similarly observed, “As much of the financial sector has gone quiet on climate issues over the past year or two, one crucial segment of it has bucked the trend: pension funds, and other long-term investors known in the trade as ‘asset owners’… Pension fund managers and other long-term asset owners have a fiduciary responsibility to protect the interests of beneficiaries decades into the future — not least by acting against long-term climate risks. The question now is whether asset owners are making good on that duty.”
Much of the Sustainable Finance Campaign’s work this year has focused on that exact question — and on working with pension beneficiaries and partners to drive the investor actions needed to fulfill that responsibility.
In 2025, leaders in states and cities across the country showed what meaningful progress can look like. In Oregon, lawmakers directed the state pension to address climate risk. In New York City, the Comptroller set strong standards for evaluating asset managers’ decarbonization plans. And in Vermont, the state pension strengthened its shareholder voting policies to better address systemic climate risk. These are promising steps and clear proof points that pensions and other asset owners can, and must, lead — even as many financial institutions and policymakers succumb to short-term pressures.
This progress was shaped by sustained engagement from the Sierra Club and partners — including research underscoring pensions’ obligation to address climate-related financial risks, analysis and recommendations to strengthen policies and practices, direct engagement with pension staff and trustees, and efforts to elevate the voices of pension beneficiaries and other stakeholders. Together, this work helped clarify expectations for what responsible fiduciary leadership means in practice.
A Blueprint for Investor Action on Systemic Climate Risk
This year, we published a new paper, The Long Term Will Be Decided Now: Why Climate Risk Demands System-Level Action from Investors, that challenges conventional approaches to climate-conscious investing and urges asset owners to confront climate change as a systemic threat to the economy and long-term portfolio returns.
The release of the paper was accompanied by op-eds in Sierra Magazine, Net Zero Investor, and Climate & Capital Media. In his newsletter, Bill McKibben called it, “Probably the best account of the folly of our financial system.”
As summarized in Sierra: “The goal should be to reduce climate risk — not just to try to avoid it — which requires investors to act in ways that actually drive emissions reductions at scale… To support a stronger, more sustainable economy, investors must prioritize credible impact over symbolic alignment and use their full influence to accelerate decarbonization.”
To do that, the paper describes four key levers for investors to deploy:
- Capital allocation: Shift financing away from fossil fuel expansion and toward clean energy, sustainable infrastructure, and other climate solutions.
- Investment stewardship: Harness shareholder voting power to hold corporations accountable for their emissions and obstructive lobbying practices.
- Policy advocacy: Support strong public policies that drive decarbonization at scale and protect long-term economic stability.
- Service-provider accountability: Ensure that financial intermediaries, like asset managers, meaningfully act on systemic climate risk, not just talk about it.
This framework guided much of our advocacy work in 2025, and we saw numerous examples of pension fund leaders across the country putting pieces of it into practice.
Progress on Shifting Capital to Drive Real-World Decarbonization
Investors shape what gets financed and on what terms, especially when companies are raising new capital. Financing decisions at these inflection points are one of the most powerful ways investors can drive real-world emissions reductions and reduce systemic risk. Here were some key developments in 2025 on this front:
Oregon passes landmark legislation
In June, Oregon lawmakers passed the Climate Resilience Investment Act, directing action to address climate-driven financial risk in the state pension fund — the first time a state legislature has mandated a climate-aligned pension strategy. Later, the state treasurer issued principles to guide the fund’s approach. In partnership with our state chapter and local allies, we’ve called for more detailed plans and urged pension leaders to adopt strong standards to steer the implementation of the new law.
New principles for investing in climate solutions
More pensions are pledging to increase investments in “climate solutions” — but there is still no consensus on what that really means. In September, we published a set of Principles for Climate Solutions Investing to guide financial institutions on how to make credible investments in climate solutions. Developed alongside dozens of labor, public interest, and environmental organizations, the principles marked the first time these groups defined what such investments should, and should not, include. Thousands of Sierra Club members and supporters have called on pensions to adopt such principles.
Urging CalPERS to strengthen its approach
The largest public pension fund in the country, CalPERS, has committed to investing $100 billion in climate solutions by 2030, and recently announced that it had counted over $60 billion toward that goal. But research revealed that CalPERS had counted portions of its holdings in major fossil fuel companies toward its “climate solutions” tally. We called on CalPERS to avoid greenwashing by providing more transparency and clearer criteria, and to prioritize investments that credibly support real-world decarbonization. Local leaders have testified at board meetings, sent thousands of messages, and engaged with trustees to urge stronger action.
Calling for action on fossil bonds
Despite the accelerating climate crisis, fossil fuel companies continue to pursue new drilling, export terminals, and pipelines through debt financing — increasingly relying on bonds rather than bank loans. This puts institutional investors, including public pensions and state treasuries, in a pivotal role. Beneficiaries’ retirement savings are still being used to purchase corporate debt that facilitates fossil fuel expansion. In addition to pushing for greater investments in climate solutions, we’ve called on pensions to stop purchasing bonds that enable new fossil fuel development and delivered messages from thousands of supporters asking their state’s pension to say no to fossil bonds.
Progress on Shareholder Voting Action for Corporate Accountability
Through shareholder voting and engagement, asset owners can hold corporate boards accountable for transition planning, responsible lobbying, and climate-risk management. Shareholder power remains essential for aligning corporate behavior with long-term economic stability. Here were some key developments in 2025 on this front:
Annual “Hidden Risk” scorecard and new tracker
In February, we released the second annual edition of The Hidden Risk in State Pensions report, which analyzed the climate-related voting guidelines, records, and transparency of 32 major U.S. pension funds. We also launched an interactive tracker of pension voting policies, which enables stakeholders to access more frequent updates. The report underscores that while some pension funds are taking responsible steps to address climate-related risks, far too many are falling behind and putting workers’ savings and public resources in greater jeopardy.
Vermont strengthens its voting guidelines
This spring, the Vermont state pension updated its shareholder voting guidelines to better address systemic risks, including climate change, biodiversity loss, and public health impacts. The revised policy expands expectations for disclosure and corporate action on those risks, and raises standards for board accountability. The update reflects a commitment to protecting retirement savings from long-term environmental and economic harm. Vermont’s approach — and that of others that receive strong grades — sets a strong example for other public pension funds to better safeguard workers’ savings amidst the climate crisis.
Shareholder meetings season takeaways
Thousands of Sierra Club members and supporters sent messages to pensions this year ahead of annual shareholder meetings at major companies across energy, autos, finance, tech, and other sectors. We urged support for key votes to hold directors accountable for credible transition planning, and for resolutions on reducing emissions, protecting biodiversity, respecting human rights, and curbing obstructive lobbying. Afterwards, we highlighted key trends and lessons, including the need for investors to demand greater board-level climate expertise and clearer metrics for evaluating corporate transition plans. While some pensions have adopted stronger shareholder voting practices, many still default to supporting corporate management, even when their actions may deepen climate risks that threaten long-term portfolio value.
Progress on Holding Asset Managers Accountable for Climate Action
Because most pensions delegate investment and voting authority to asset managers, accountability is critical. Asset owners must ensure that managers deliver credible climate strategies and real-economy impact, not just marketing claims. Here were some key developments in 2025 on this front:
NYC Comptroller sends a powerful message to Wall Street
NYC’s Comptroller announced strong criteria for evaluating asset managers’ net-zero strategies, with consequences for firms that fall short. In November, the Comptroller recommended shifting $42 billion away from BlackRock due to inadequate climate practices. This could mark the first time a U.S. pension system has moved funds of this scale over climate concerns. If adopted, it would build on momentum from peers in the UK and Europe that moved tens of billions away from major asset managers this year and reinforce a powerful message: asset managers that fail to confront climate risk should expect to lose clients to those that will. That decision now rests with the city’s pension trustees — and we are engaging with local partners and pension beneficiaries to urge them to act.
Sierra Club Foundation leads by example
In June, the Sierra Club Foundation moved assets away from BlackRock toward managers with stronger climate credentials, demonstrating how institutional investors can align investments with both fiduciary responsibilities and climate objectives. The Foundation’s action underscored that clients can evaluate climate performance, set expectations in manager mandates, and choose service providers who meet those standards.
Wall Street and Washington Retreat from Climate Leadership
All of this progress happened during a year when much of the rest of the financial sector moved in the opposite direction on climate. In 2025, major banks, asset managers, and federal regulators reversed climate commitments — not because climate risk diminished, but because of political pressure and short-term incentives.
Wall Street steps back
Every major U.S. bank left the Net Zero Banking Alliance, and BlackRock withdrew from the Net Zero Asset Managers initiative, prompting the coalition to suspend operations. These departures were driven by political attacks and “anti-ESG” campaigns, not because of new evidence about climate risk or the urgency to act.
Some firms went further, including Wells Fargo, which abandoned its net-zero target and sector-level emissions goals. Meanwhile, the annual Banking on Climate Chaos report showed a stark reversal in funding trends: global fossil fuel financing jumped by $162 billion from 2023 to 2024 after years of decline. U.S. banks accounted for $289 billion of that total — with JPMorgan Chase, Bank of America, Citi, and Wells Fargo responsible for more than one-fifth of fossil financing by major banks worldwide.
Regulators weaken oversight and accountability
U.S. federal regulators also walked back preliminary steps to manage climate-related financial risks. Banking agencies withdrew principles that guided banks in assessing physical and transition risks; the Federal Reserve exited a key international climate-risk network; and the Financial Stability Oversight Council dissolved its climate-risk committees, ending coordinated federal efforts that had barely begun to oversee these threats.
Investor protection agencies followed suit. The Securities and Exchange Commission stopped defending its corporate climate disclosure rule, and the Department of Labor moved to weaken rules allowing retirement plans to consider sustainability factors — changes that could hinder investors’ ability to evaluate risk and act in clients’ best interests.
All of these reversals were political choices, not responses to new evidence. Taken together — along with recent efforts to restrict shareholder proposals and limit independent voting guidance — they reflect a coordinated push to shift more power from investors to corporate executives. This agenda aims to reduce accountability for corporate polluters and sideline the workers, retirees, and long-term investors whose capital underpins the financial system. Asset owners cannot allow these attacks on investor rights to become the new normal; they have a responsibility to push back and hold companies accountable.
Asset owners matter more than ever
This broader retreat makes long-term investor leadership even more essential. Public pensions and other asset owners are uniquely positioned to drive change. They can steer capital toward decarbonization, hold corporate boards accountable, set clear mandates for asset managers, and take other meaningful actions. Their fiduciary duties span generations, and their portfolios rely on the stability of the overall economy far more than on companies’ short-term profits.
Federal oversight may strengthen again in the near future, and Wall Street could face renewed accountability. But asset owners don’t need to wait. By adopting clear expectations and strong practices now, pensions can protect beneficiaries’ savings and support a more stable and resilient economy — even when other financial actors fall short.
Looking Ahead: The Work in 2026
2025 offered powerful examples of what it looks like when asset owners use their influence — and how much more is required to meet the scale of the climate crisis. Most pensions and other long-term investors are still far from aligning their practices with the systemic risks facing the economy. The coming year will be critical for building on recent progress and advancing the next phase of this work across several key priorities:
- Scaling investments in climate solutions. We’ll urge investors to adopt clear standards and shift more capital into credible, high-impact solutions.
- Restricting capital for fossil fuel expansion. We’ll press pensions to stop investing in bonds and other financing that enable fossil fuel expansion.
- Strengthening shareholder voting practices. We’ll build on our analyses and tools to help investors adopt voting practices that hold corporations accountable and drive meaningful change.
- Holding major asset managers accountable. We’ll call on pensions to set strong expectations for their managers — including credible transition plans, stronger voting practices, and responsible policy advocacy.
Across all of this work, our power comes from workers, retirees, labor leaders, and community advocates who show up in public forums and direct engagements to make their voices heard. Their persistence is essential to moving the institutions that shape our future. The long term is being decided now — and we will keep working to meet the moment and help build a safer, more sustainable future for everyone.
link
:max_bytes(150000):strip_icc()/GettyImages-1246652809-9232cebf0938444191353cddfc926f8e.jpg "What Are Basis Points in Finance? Understand Their Importance")
