Pension funds under pressure on climate change

27th April 2015

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Paul Millichamp

Nearly half of the top 500 global asset owners are doing nothing to protect investments under their stewardship from the threat of climate change, according to the Asset Owners Disclosure Project (AODP).

The AODP, an independent global organisation aiming to improve disclosure of climate change risks by pension funds, has ranked the world’s largest 500 asset owners according to their performance in managing and disclosing the risks.

It found that 232 owners of pension, insurance and sovereign funds are not acting to protect their assets from climate change risk. The analysis reveals that only 7% of asset owners are able to calculate emissions from companies they invest in, while just 1.4% has reduced the carbon intensity of their funds from the previous year and 2% has an emission intensity reduction target for next year.

No fund, including those that have partially divested away from fossil fuels, has yet calculated the exposure of their whole portfolio to companies that own fossil fuel reserves.

Globally, the UK comes 10th and has 35 funds that are ranked the lowest performers, the data reveals. These include the MPs pension fund the UK parliamentary contributory pension fund, and the pension funds for employees at Tesco, Rolls-Royce Group, the National Grid and GSK.

Top performing UK pension funds include those from the Environment Agency, which ranks fifth in the index, and Aviva, which comes 12th.

Meanwhile, AODP and lawyers at ClientEarth have launched an initiative to challenge trustees and managers of pension funds to fulfil their legal duties to protect investment from financial risks posed by climate change.

The climate and pensions legal initiative (CPLI) could result in a legal test case if some funds continue to fall below the standards required of them, the NGOs warned.

AODP's chief executive Julian Poulter said that pension fund members in a number of jurisdictions are frustrated with their funds' lack of response to the threat of climate change.

“Here in the UK, and elsewhere, they have been asking us to look at legal escalation options on their behalf, and it is possible that this will result in the world's first fiduciary case in this area,” Poulter said.


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