Report: Pensions in a Changing Climate

A new report from Share Action finds that pension funds are not doing an adequate job of disclosing climate risk in their portfolios.

The most striking finding of our analysis reveals that over 60% of pension funds publish little or no information on their climate responses, placing them at risk of breaching their legal duties to their beneficiaries. While a quarter of funds acknowledge their climate responses are aligned with their fiduciary duties, 11% have published statements clarifying this important connection. Our assessment of formal climate policies finds that only 10% of funds, however, have a formal investment policy that seeks alignment with the goals
of the Paris Agreement….Our assessment identifies a large gap in the
formal climate-risk assessment of portfolios, with nearly 90% of assets collectively managed by the funds (representing US$10 trillion) yet to undergo
assessment. In the minority of cases where this has been undertaken, we find that transition risks (especially stranded assets risk) are more widely assessed than physical risks. However, Only 15% of pension funds have developed a policy on phasing out exposure to coal-dependent assets. A greater proportion of funds, almost 20%, are performing forward-looking climate scenario analysis in their
portfolios, as recommended by the TCFD.

The report notes that Europe, the Middle East and Asia are ahead of
Asia-Pacific and the Americas, “driven largely by leadership from Netherlands and Sweden and despite average performance from the UK. Strong results from California and New York reveal a pocket of leadership within the United States, despite overall weak performance at the national level. Australia also
demonstrates leadership in the Asia-Pacific region.”

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