Pension funds and investors quietly back climate investing

In a world of intensifying pushback against climate action and sustainability rhetoric, pension funds and insurance companies are quietly positioning themselves as major players in climate and impact investing. These investors are not only responding to more volatile weather patterns, but also the wishes of pensioners, who increasingly seek environmentally sustainable investments. As a result, some funds could focus more on long-term security rather than short-term risk avoidance. “We think a lot about the planetary boundaries and how we can broaden the investable impact space,” said Krispijn Bertoen, head of responsible investment at MN, the fiduciary manager for a large pension fund in the Netherlands. “But I think the political pressure and how the populist right is moving ahead is a big factor, and we will be influenced by it.” Bertoen, along with many other pension managers and sustainable impact investors, are meeting this week in Berlin, Germany, at the annual Global Impact Investing Network Forum. The gathering is small and intimate, tucked into the conference center of a hotel on the outskirts of the city. The area is studded with the offices of big investors and global development players, from Allianz and Visa to GIZ and UNICEF. Underlying almost every session is climate change, with pension funds, insurers, and investors speaking both to the risks of not acting with climate threats in mind, and the opportunities within nature-based, climate-conscious investment strategies. In an opening segment of the conference, Sonja Stuchtey, the founder and managing director of the Landbanking Group, said that just 1% of $800 million in assets would be needed to stabilize a hypothetical company’s risk and preserve nature. Impact investing is funding that aims to generate measurable social or environmental benefits alongside financial returns. The global impact investment market is massive — currently priced at $1.57 trillion. And, according to a report released Wednesday, the market has seen a 21% average growth rate in the last six years. Anyone following climate negotiations is likely to look at that number with stars in their eyes as it so perfectly aligns with the $1.3 trillion per year that countries agreed in 2024 was necessary to address the climate crisis. Pensions comprise the largest share of the impact investing market, with 35% of impact capital sourced from pension funds. But with multiple planetary crises converging and political will for climate action shrinking, it’s becoming increasingly challenging to figure out where that money should go, and how to get it there quietly to avoid backlash amid an increasingly hostile U.S. approach to climate action. Investment firms are toning down when it comes to climate rhetoric, shifting their strategies to talk about resilience rather than ESG — or environmental, social, and governance spending, according to an attendee who spoke to Devex on condition of anonymity. At the event, representatives from some of the world’s largest pension funds — including Ontario Teachers’ Pension Plan, Netherlands-based pension fund manager PGGM, and MN — described why impact investing is no longer peripheral. Anna Murray, the senior managing director and global head of sustainable investing at Ontario Teachers’ Pension Plan, which holds about $250 billion in assets, said that they are trying to integrate sustainability, risk and opportunity into their investments, which often means focusing on the long-term impacts of climate change and how they can both hedge against them and take advantage of new technologies. Studies showed that pensioners want their investment channeled toward social good. In one study of Dutch pensioners, 78% of respondents said they wanted their pension scheme to invest in sustainability. Another in the U.K. showed that two-thirds of respondents want the same. “Of the six trustees and pension funds that we serve … they have two investment beliefs that are connected to sustainability and impact,” said Bertoen. “One is how do you manage risk by looking at ESG factors and how they affect financial return? And the other one is, how does my portfolio impact the world? “They truly believe that they should do something, not only think about what the impact is, but then also try to contribute to improve certain things.” Insurance companies are also leveraging the funds from their customers to invest in climate solutions. “Our customers don’t make investment decisions — they buy insurance,” said Gabi Recke, head of sustainability at Allianz. “That allows us to act long term and deploy capital strategically toward systemic impact.” However, progress has been uneven. A U.N.-convened coalition of insurers and reinsurers, the Net-Zero Insurance Alliance, or NZIA, that committed to insurance portfolios that would reach net-zero greenhouse gas emissions by 2050, was discontinued in April 2024. But climate is still on the books. A survey by BlackRock in 2024 showed that among 410 senior executives at companies with a collective $27 trillion in assets, virtually all global insurers include at least one low-carbon transition goal in their investment plans. But for insurance firms, investing in climate solutions also lowers their risk and benefits their business long-term, experts said. So whether or not people believe climate change is real, insurers certainly do — and are acting accordingly. “With climate risk models, we have more insights of what is happening,” said Danielle Brassel, the head of responsible investment at Zurich Insurance Group. “And interestingly, we see that further strategies that we have taken for climate have already helped us to avoid certain risks.”