Climate change is now a central factor in pension outcomes, funding strategies, and retirement security across the UK, the Society of Pension Professionals (SPP) has warned.

Its paper, Pensions in a Warming World, emphasised that climate change is no longer solely an environmental issue; it is a financial and governance challenge set to reshape investment returns, covenant strength, inflation, and the long-term value of pension savings.

The association warned that pension schemes cannot simply diversify away from climate change.

Differing pathways, ranging from early and co-ordinated action to delayed transition or escalating physical impacts, could result in varying financial outcomes for defined benefit, defined contribution (DC), collective DC, and public sector schemes, the paper noted.

Delaying action in response to climate change could increase exposure to market volatility, policy shocks, and systemic economic disruption, with climate change posing a financially material risk affecting returns, funding positions, and retirement outcomes.

Furthermore, the SPP highlighted that pension schemes faced rising governance challenges around fiduciary duties, data quality, regulation, and stakeholder expectations.

Effective climate governance was therefore becoming a central component of prudent long-term pension management.

The report called for a more informed debate about how pension schemes in the UK can deliver good member outcomes amid greater climate risk and an increased focus on long-term resilience.

"Climate change is no longer a future risk for pension schemes, it is a present-day financial reality,” commented SPP president, Calum Cooper.

“The decisions trustees, policymakers and investors make over the next decade will help determine not only the value of pension assets, but the retirement outcomes of millions of savers.

“Put simply, you can’t separate the future of pensions from the future of the economy. And you cannot separate the future of the economy from climate change. That means that climate risk is now retirement risk.”

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