State of OECD Pension Funds’ Climate Transition

The report finds that while OECD pension funds have significantly increased their climate target-setting and risk management since 2020, their portfolios remain heavily exposed to fossil fuel expansion. Pension funds often outperform other financial institutions in areas like policy engagement and emissions disclosure once climate goals are embedded in their governance. The analysis highlights that robust regulatory frameworks in countries like the Netherlands, Denmark, and the UK drive higher adoption of targets, and suggests that the relationship between asset owners and asset managers is a critical lever for driving decarbonization.

• OECD pension funds have increased their climate target-setting between 2020 and 2024, with the most notable progress in mitigation targets due to better baseline specifications and coverage of sectors and asset classes. However, significant gaps persist, particularly regarding climate investment targets.
• There has been strong improvement in the integration of climate change into strategy and governance, specifically within internal accountability frameworks, climate risk strategy, and climate risk management, often involving the appointment of board members with climate expertise.
• Pension fund energy portfolios remain heavily concentrated in fossil fuels; of 96 funds with USD 310 billion in energy investments, 55% (USD 169 billion) is in expansionist fossil fuel companies, while only 38% is directed toward clean energy companies.
• Regarding new energy investments, 63% of indirectly enabled investment from OECD pension funds is classified as clean, 4% as transition, and 33% as fossil fuels, totaling USD 479 billion across 2,750 projects.
• When pension funds embed climate into governance, they often match or exceed other financial institutions, specifically outperforming them in policy engagement, emissions disclosure, fossil fuel exclusion targets, and clean energy exposure (38% for pension funds versus 26% for other FIs).
• The adoption of targets, implementation measures, and transition plans correlates with higher clean energy holdings; funds that adopted these elements have an average clean energy share of 45-46%, compared to 27-29% for those that did not.
• Regulatory environments significantly impact fund behavior; countries with required climate risk inclusion, such as the Netherlands, Denmark, and the UK, see the highest levels of target implementation, whereas voluntary regimes create uncertainty.
• Pension funds use three primary strategies to influence asset managers: systematic engagement and active ownership (e.g., revised mandates), mandate termination for failure to meet expectations (e.g., terminations by the People’s Pension and Akademiker Pension), and reallocation or internalization of management (e.g., PFZW reducing its equity portfolio from 3,500 to 800 names).

APA

Fabian, F., Parenti, C., Taylor, M., & Micale, V. (2025). State of OECD Pension Funds’ Climate Transition. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/1990/12/ES-State-of-OECD-Pension-Funds.pdf

Chicago

Fabian, Frederick, Claris Parenti, Maddy Taylor, and Valerio Micale. State of OECD Pension Funds’ Climate Transition. Climate Policy Initiative, 2025. https://www.climatepolicyinitiative.org/wp-content/uploads/1990/12/ES-State-of-OECD-Pension-Funds.pdf.

Wikipedia

{{cite report |last1=Fabian |first1=Frederick |last2=Parenti |first2=Claris |last3=Taylor |first3=Maddy |last4=Micale |first4=Valerio |title=State of OECD Pension Funds’ Climate Transition |publisher=Climate Policy Initiative |date=December 2025 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/1990/12/ES-State-of-OECD-Pension-Funds.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{fabian2025state, author = {Fabian, Frederick and Parenti, Claris and Taylor, Maddy and Micale, Valerio}, title = {{State of OECD Pension Funds’ Climate Transition}}, institution = {Climate Policy Initiative}, year = {2025}, month = dec, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/1990/12/ES-State-of-OECD-Pension-Funds.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }