Public pension funds risk breaching climate change duties

Over 60 per cent of the world’s largest public pension funds are in danger of beaching their legal climate change duties, a new study from Asset Owners Disclosure Project (AODP) has found.

The study highlighted that 63 of the 100 largest pension funds have little to no strategy when it comes to climate change and risk not meeting the new Task Force on Climate-related Financial Disclosures regulations.

Little to no information regarding the financial implications of climate change was presented in those 63 funds’ portfolios and they have been warned that they may be exposed to heightened litigation risks.

AODP analyst, Felix Nagrawala commented: “AODP is turning up the heat on public pension funds who fail to address climate change in their investments. Pension funds have a duty to serve the long-term interest of their members, which isn’t being met if the money they invest is depleted along with the health of the planet.”

Three UK pension funds were assessed (USS, Railpen, and Electricity Supply Pension Scheme) and were found to be lagging behind their European counterparts. These findings add to worries surrounding UK pension funds and climate change after MPs criticised nine of the UK’s largest funds of being “worryingly complacent” earlier this year.

Three of the top four (AP4, Fonds de Réserve pour les Retraites and ABP) were European based and five funds in each of Sweden and Netherlands received a leading rating.

However, less than one per cent of the assets of those surveyed were invested in low-carbon solutions and only 10 per cent have a policy to exclude coal from their investment portfolio.

The report said that pension funds taking a leading role in promoting environmentally friendly investments is key to making a difference as the industry accounts for one third of all asset owners’ investments globally.

Ceres senior director, international investor engagement, Chris Fox, concluded: “AODP’s research provides a powerful overview of the climate performance of the global pensions industry, and clearly highlights the need for deeper action towards aligning pension investments with the <2C goal. We hope the ranking will be a wake-up call.”

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