Increasing Subnational Pension Funds’ Climate Investments

The report identifies subnational pension funds as a significant source of untapped capital for urban climate action, estimating at least USD 9.5 trillion in assets across Brazil, Canada, Germany, the Netherlands, South Africa, the UK, and the US. It details structural barriers such as low risk appetite and limited fund size, as well as external barriers like a lack of bankable project pipelines and ticket size mismatches. To overcome these, the document recommends the use of financial instruments such as blended finance, green bonds, and supply-side aggregation (pooling), while urging funds to make net zero commitments and build internal capacity.

• Subnational pension funds in Brazil, Canada, Germany, Netherlands, South Africa, United Kingdom, and United States are estimated to manage an aggregate of at least USD 9.5 trillion in assets.
• Subnational pension funds face significant structural barriers to climate investment, including a conservative risk appetite driven by fiduciary duties, limited internal capacity for due diligence in smaller funds, and restrictive portfolio allocations for 'alternative' investments, which are often limited to 5-10%.
• External barriers include a 'ticket size' mismatch where large funds require investments of hundreds of millions of dollars, while many urban climate projects are too small; additionally, there is a universal lack of commercially viable, bankable projects that do not require the investor to take on development risk.
• Supply-side aggregation, or the pooling of smaller funds, has proven successful in the UK, where 89 small schemes were consolidated into eight pooled funds, allowing for larger investments and shared management capacity.
• Financial instruments such as first-loss tranches, guarantees, and loan loss reserves can de-risk investments, making climate-smart infrastructure more appealing to risk-averse subnational funds.
• The report recommends that subnational pension funds make net zero commitments and build internal capacity, while local governments should establish project preparation facilities to increase the supply of bankable projects.

APA

Solomon, M., & Pinko, N. (2022). Increasing Subnational Pension Funds’ Climate Investments. Climate Policy Initiative. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/09/Increasing-Subnational-Pension-Funds-Climate-Investments.pdf

Chicago

Solomon, Matthew, and Nicole Pinko. Increasing Subnational Pension Funds’ Climate Investments. Climate Policy Initiative, 2022. https://www.climatepolicyinitiative.org/wp-content/uploads/2022/09/Increasing-Subnational-Pension-Funds-Climate-Investments.pdf.

Wikipedia

{{cite report |last1=Solomon |first1=Matthew |last2=Pinko |first2=Nicole |title=Increasing Subnational Pension Funds’ Climate Investments |publisher=Climate Policy Initiative |date=September 2022 |url=https://www.climatepolicyinitiative.org/wp-content/uploads/2022/09/Increasing-Subnational-Pension-Funds-Climate-Investments.pdf |access-date=17 August 2026 |via=Climate Insights Directory}}

BibTeX

@techreport{solomon2022increasing, author = {Solomon, Matthew and Pinko, Nicole}, title = {{Increasing Subnational Pension Funds’ Climate Investments}}, institution = {Climate Policy Initiative}, year = {2022}, month = sep, url = {https://www.climatepolicyinitiative.org/wp-content/uploads/2022/09/Increasing-Subnational-Pension-Funds-Climate-Investments.pdf}, urldate = {2026-08-17}, note = {Indexed by Climate Insights Directory} }