State of OECD Pension Funds' Climate Transition: Insights and Recommendations from the Net Zero Finance Tracker

The report evaluates the climate transition of 594 OECD pension funds using Net Zero Finance Tracker data. While target-setting is improving, significant exposure to expansionist fossil fuel companies remains. The analysis finds that funds with formal climate targets and transition plans hold higher shares of clean energy and that robust regulatory frameworks in countries like the UK, Denmark, and the Netherlands correlate with stronger climate action.

• Pension funds are increasing their climate targets and implementation efforts, particularly regarding mitigation, with more detailed baselines and specified sectors and asset classes. However, gaps persisted in 2024, especially concerning climate investment targets.
• A significant portion of pension fund energy portfolios is invested in companies expanding fossil fuel operations, which is inconsistent with the International Energy Agency's net-zero scenario. In a sample of 96 entities with USD 310 billion in energy investments, expansionist fossil fuel companies accounted for 55% (USD 169 billion), while non-expansionist companies accounted for 8% (USD 24 billion) and clean energy for 38%.
• Pension funds that embed climate into governance and investment processes perform as well as or better than other financial institutions on climate indicators. They also maintain higher clean technology exposures in energy portfolios (38%) compared to other financial entity types (26%).
• The adoption of climate targets, implementation measures, and transition plans leads to measurable shifts in portfolio allocation, specifically resulting in a higher share of clean energy holdings.
• Regulatory environments significantly impact climate action; funds in the UK, Denmark, and the Netherlands show stronger targets and implementation due to clear guidance. Conversely, voluntary or fragmented regimes hinder progress, suggesting a need for regulators to mandate climate risk management as part of fiduciary duty.
• European pension funds outperform those in North America and Asia on disclosure and stewardship policies, with the latter often facing political or legal constraints on ESG integration. Large funds are increasingly using their influence over asset managers through tighter mandates, climate-aligned voting, and the termination of underperforming mandates.

APA

Climate Policy Initiative (2025). State of OECD Pension Funds' Climate Transition: Insights and Recommendations from the Net Zero Finance Tracker. https://www.climatepolicyinitiative.org/publication/state-of-oecd-pension-funds-climate-transition-insights-and-recommendations-from-the-net-zero-finance-tracker/

Chicago

Climate Policy Initiative. State of OECD Pension Funds' Climate Transition: Insights and Recommendations from the Net Zero Finance Tracker. 2025. https://www.climatepolicyinitiative.org/publication/state-of-oecd-pension-funds-climate-transition-insights-and-recommendations-from-the-net-zero-finance-tracker/.

Wikipedia

{{cite report |author=Climate Policy Initiative |title=State of OECD Pension Funds' Climate Transition: Insights and Recommendations from the Net Zero Finance Tracker |date=16 December 2025 |url=https://www.climatepolicyinitiative.org/publication/state-of-oecd-pension-funds-climate-transition-insights-and-recommendations-from-the-net-zero-finance-tracker/ |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{climatepolicyinitiative2025state, author = {{Climate Policy Initiative}}, title = {{State of OECD Pension Funds' Climate Transition: Insights and Recommendations from the Net Zero Finance Tracker}}, institution = {Climate Policy Initiative}, year = {2025}, month = dec, url = {https://www.climatepolicyinitiative.org/publication/state-of-oecd-pension-funds-climate-transition-insights-and-recommendations-from-the-net-zero-finance-tracker/}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }