PLSA ESG 23: Integrated assessment models ‘not fit for purpose’

Integrated assessment models used to evaluate the feasibility of climate goals are “not fit for purpose” for pension schemes, Cushon strategic adviser, Julius Pursaill, has stated.

Speaking at the Pensions and Lifetime Savings Association (PLSA) ESG Conference, Pursaill warned that those using an integrated assessment model did not understand the extent to which their portfolios were exposed to transition and physical climate risk.

“Were you aware that integrated assessment models typically make a whole series of assumptions that are demonstrably invalid?,” he asked.

“The first assumption is: If you run a business that is not affected by the weather, then you are not affected by climate change.

“The next assumption is that they don’t take into account feedback loops or any step changes that come about as a result of climate change; those things are just not in the models.

“So, these things are dramatically underestimating the likely impact on your portfolios of climate change.”

Pursaill argued that these kind of integrated assessment models should not be used because they do not deliver credible, actionable outcomes.

Touching on trustees’ fiduciary duty, Pursaill called for a reinterpretation of fiduciary duty to enable trustees to take into account members’ standard of living in retirement and the potential state of the world once they hit retirement.

“We think it’s perverse that trustees cannot take into account the quality of life of their members in retirement,” he said.

“We are very supportive of some reinterpretation of fiduciary duty.”



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