Maddy Taylor

Pension funds—among the world’s largest asset owners—play a unique role in the financial sector’s climate transition. Given their long investment horizons, they are particularly exposed to both transition and physical climate risks that threaten asset values and returns. Unlike other institutional investors, which often focus on short-term performance, pension providers have a fiduciary duty to address long-term systemic issues and act in their beneficiaries’ best interests.

Achieving the scale of investment needed for the climate transition—and capturing the economic and environmental benefits that come from it—is achievable but will require financial institutions (FIs) to play a central role. Progress has been made, but the withdrawal of major FIs from climate coalitions since late 2024, as well as the disbandment of the Net Zero Banking Alliance and revisions to the Net Zero Asset Managers Alliance in 2025, highlight current challenges.