Increasing Subnational Pension Funds’ Climate Investments

This report analyzes the potential for subnational pension funds to increase investments in climate-smart urban infrastructure. It defines subnational pension funds as those limiting membership by location (province, region, state, city) or occupation. The document identifies structural and external barriers to these investments, evaluates the landscape across seven countries, and proposes financial instruments and policy recommendations to mobilize this untapped capital for the climate transition.

• 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. The United States holds the largest share, with state and local pension funds managing nearly USD 6 trillion.
• 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 strategies that limit allocations to 'alternatives' (often to 5-10%).
• External barriers hinder the flow of capital into urban climate projects, specifically the 'ticket size' mismatch where projects are too small for large funds' minimum investment requirements, and a lack of a pipeline of commercially viable, bankable projects.
• Financial instruments can mitigate risks and bridge the gap between pension funds and climate projects. These include blended finance (first-loss tranches, guarantees, loan loss reserves), green bonds, municipal green funds, and aggregation strategies (supply-side pooling of funds or demand-side pooling of projects).
• Case studies illustrate successful models: CDPQ in Canada uses a specialized subsidiary (CDPQ Infra) to manage projects from planning to execution, while the UK's GLIL Infrastructure operates as a 'fund of funds' to provide smaller subnational funds with specialized capacity for alternative investments like wind and solar farms.

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} }