Many US state pensions fail to address climate risk in proxy voting

February 14, 2025

While some US state pensions are starting to use proxy voting as an effective risk management tool, too many still fall short in addressing climate-related financial risks in their voting guidelines and practices.

In an assessment of pensions fund’s proxy voting guidelines’ strength in addressing climate- and environment-related financial risks, the Sierra Club report revealed only one pension earned an A grade while two-thirds of the pensions received D or F grades.

The New York State Common Retirement Fund received an A grade for its guidelines, which proactively address the full scope of risk mitigation measures on key systemic risks.

Meanwhile, seven state pension funds, including the California Public Employees’ Retirement System, received B grades for their strong performance on systemic risk, climate resolutions and climate lobbying resolutions and moderate performance in all other areas.

The report also evaluated proxy voting records on climate-related votes, revealing that eight pension systems from California, Massachusetts, New Jersey, New York, Ohio, and Oregon earned A grades, indicating that they are adopting a thorough approach to risk management.

Whereas pension systems in Connecticut and LA Country received B grades while the State of Wisconsin Investment Board and the Washington State Investment Board received C grades.

Of the 32 pension funds assessed, the only pension fund to receive an overall A grade was the Massachusetts Pension Reserves Invesment Management due to its B grade for guidelines, A grade for voting and the availability of its vote record through the Freedom of Information Act.

Nine funds earned B or C grades for having transparent voting records and solid-to-moderate proxy voting guidelines. Fourteen received D or F grades due to transparent voting records but weak-to-poor proxy voting guidelines, resulting in poor outcomes. Eight pensions were given 'incomplete' grades for not disclosing their voting records.

Minerva’s blog focuses on the latest developments in ESG investing and stewardship. Minerva is a global provider of sustainable stewardship solutions with over 25 years of expertise. Minerva empowers investors by providing essential tools, including ESG research and data, enabling them to navigate the intricate landscape of stewardship and proxy voting, whilst ensuring their decisions are well-informed and aligned with sustainable principles.

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