Key Takeaways
- • Climate Policy Initiative (CPI) finds asset managers account for 53% of clean energy financing and 61% of fossil fuel financing, based on its Net Zero Finance Tracker (NZFT) data for 2023, despite banks providing 95% of observed direct project financing.
- • Only 6% of pension funds in CPI's sample of 342 European institutions retain full internal control of asset management, and nearly 90% delegate to multiple asset managers.
- • CPI describes the delegation of pension capital as a principal-agent problem, with many pension funds lacking full visibility into how their capital is managed.
- • CPI proposes a six-criteria framework, grouped under two pillars, to assess pension fund–asset manager relationships and their net-zero influence potential.
- • CPI argues that delegation is not abdication: trustees have a fiduciary duty to ensure delegated capital is governed in line with climate goals, particularly as voluntary coalitions face political headwinds.
Summary
According to Climate Policy Initiative (CPI), asset managers are key enablers of capital allocation. Analysis of project-level data from CPI's Net Zero Finance Tracker (NZFT) shows that asset managers accounted for 53% of clean energy financing and 61% of fossil fuel financing in 2023, largely by allocating capital to institutions, corporates and real-economy actors that ultimately invest in these assets. By comparison, banks provided 95% of observed direct financing for new energy projects in each category, primarily in the form of commercial debt.
CPI argues that pension funds are uniquely positioned to drive climate impact if they can influence the asset managers that deploy their capital. Many pension funds are "universal owners" whose performance is tied to the health of the overall global economy. CPI's 2024 report, The State of European Pension Funds' Net-Zero Transition, examined 342 European institutions and found wide disparities in the implementation of net-zero targets, partly because delegation through complex chains of external managers and advisers makes responsibility for net-zero outcomes difficult to assign.
CPI characterises the delegation challenge as a principal-agent problem. While asset owners may set high-level ambitions, asset managers may lack the incentive or instruction to act on them, particularly where managers control voting rights or engagement strategies without clear guidance. CPI's sample shows that only 6% of pension funds retain full internal control of asset management, while nearly 90% delegate to multiple asset managers.
CPI points to recent developments as evidence of the limits of voluntary coordination. The Net Zero Asset Managers initiative (NZAM) is on hold after BlackRock and several peers exited in early 2025, and departures from Climate Action 100+ have added to doubts about industry alignment on climate goals. CPI also notes that state-level anti-ESG laws in the U.S. restrict public pension funds from incorporating climate considerations in asset manager mandates.
CPI's initial research identifies funds that are designing effective delegation models, combining multi-manager setups with strict mandate terms, policy-aligned voting and enforceable escalation paths. Denmark's PFA is adapting by taking more capital management in-house, while European funds such as ATP and PFZW embed net-zero KPIs directly into mandates and require managers to report, act and escalate when performance lags. CPI says fragmented delegation can also work if control is strong.
CPI is expanding the NZFT to map asset owner–asset manager pathways, linking pension fund capital through managers to real-economy finance, and its six-criteria framework is intended to help answer which managers are key intermediaries in climate finance flows, whether stronger relationships correlate with better net-zero alignment, and which delegation models best support alignment. CPI concludes that trustees must address how delegated capital is governed, and that asset owners in the U.S. and other jurisdictions facing political headwinds may need to further explore the long-term risk and fiduciary implications of their managers' capital allocation decisions.
CPI argues that pension funds are uniquely positioned to drive climate impact if they can influence the asset managers that deploy their capital. Many pension funds are "universal owners" whose performance is tied to the health of the overall global economy. CPI's 2024 report, The State of European Pension Funds' Net-Zero Transition, examined 342 European institutions and found wide disparities in the implementation of net-zero targets, partly because delegation through complex chains of external managers and advisers makes responsibility for net-zero outcomes difficult to assign.
CPI characterises the delegation challenge as a principal-agent problem. While asset owners may set high-level ambitions, asset managers may lack the incentive or instruction to act on them, particularly where managers control voting rights or engagement strategies without clear guidance. CPI's sample shows that only 6% of pension funds retain full internal control of asset management, while nearly 90% delegate to multiple asset managers.
CPI points to recent developments as evidence of the limits of voluntary coordination. The Net Zero Asset Managers initiative (NZAM) is on hold after BlackRock and several peers exited in early 2025, and departures from Climate Action 100+ have added to doubts about industry alignment on climate goals. CPI also notes that state-level anti-ESG laws in the U.S. restrict public pension funds from incorporating climate considerations in asset manager mandates.
CPI's initial research identifies funds that are designing effective delegation models, combining multi-manager setups with strict mandate terms, policy-aligned voting and enforceable escalation paths. Denmark's PFA is adapting by taking more capital management in-house, while European funds such as ATP and PFZW embed net-zero KPIs directly into mandates and require managers to report, act and escalate when performance lags. CPI says fragmented delegation can also work if control is strong.
CPI is expanding the NZFT to map asset owner–asset manager pathways, linking pension fund capital through managers to real-economy finance, and its six-criteria framework is intended to help answer which managers are key intermediaries in climate finance flows, whether stronger relationships correlate with better net-zero alignment, and which delegation models best support alignment. CPI concludes that trustees must address how delegated capital is governed, and that asset owners in the U.S. and other jurisdictions facing political headwinds may need to further explore the long-term risk and fiduciary implications of their managers' capital allocation decisions.
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