State of OECD Pension Funds’ Climate Transition

The report finds that while OECD pension funds are increasing their climate target-setting and internal governance, their portfolios remain heavily exposed to expansionist fossil fuels. Progress is strongly linked to national regulatory environments, with the Netherlands, Denmark, and the UK leading. A critical lever for future impact is the governance of the asset owner–asset manager relationship, where leading funds are moving toward more active mandates, stricter stewardship oversight, and in some cases, the internalization of asset management to ensure alignment with net-zero goals.

• OECD pension funds have increased climate target-setting over the last five years, but quality remains low. The share of funds by assets under management or ownership (AUM/O) moving beyond 'Planned' targets rose from 9% in 2020 to 63% in 2024, yet only 1% achieved 'Advanced' scores in 2024.
• Pension funds' energy portfolios are significantly misaligned with net-zero pathways. In a sample of 96 funds with USD 310 billion in energy holdings, 55% (USD 169 billion) is invested in expansionist fossil fuel companies, while only 38% (USD 117 billion) is directed toward clean energy.
• Indirect project-level financing from OECD pension funds is predominantly clean and transition-focused, though a third still supports fossil fuels. In 2024, 67% of indirectly enabled investment was classified as clean (63%) and transition (4%), while 33% went to fossil fuels.
• There is a positive correlation between the adoption of climate targets, implementation measures, and transition plans and a higher share of clean energy in energy portfolios. Funds adopting these elements hold a clean energy share of 45% to 48%, compared to the sample average of 38%.
• National policy frameworks strongly influence pension fund performance. The Netherlands, Denmark, and the UK are identified as 'Strong' jurisdictions due to clear regulatory guidance and mandatory disclosures, whereas the US, Canada, Japan, and South Korea are categorized as 'Limited' due to fragmented or ambiguous regulations.
• The relationship between asset owners and asset managers is a primary channel for driving climate impact. Leading funds are employing three main strategies: strengthening stewardship through revised mandates, terminating mandates for non-compliance, and reallocating capital to aligned managers or internalizing management.
• Pension funds often outperform other financial institutions in specific implementation areas once they integrate climate into their strategies, particularly in fossil fuel exclusion targets, policy engagement, and climate risk management.

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/1996/12/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/1996/12/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/1996/12/State-of-OECD-Pension-Funds.pdf |access-date=23 October 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/1996/12/State-of-OECD-Pension-Funds.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }