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Pension funds quizzed on climate risk

Pension fund members have mobilised to ask their funds how their climate-exposed investments are being protected.

Supported by environmental lawyers ClientEarth and ShareAction, more than 50 pension fund members have written to their funds to ask how they are measuring and managing the exposure of their investment portfolios to climate risks.

Members have also asked whether their funds have climate risk policies in place, addressing, for example, the funds’ stewardship responsibilities.

The letters request several documents which will help shed light on their pension funds’ approach to climate risks and give a two-month deadline for a response.

Jane Thewlis, who is a member of the West Yorkshire Pension Fund, said:  “I’m concerned about the planet but also about my future pension. Climate change can have a serious financial impact on the value of investments. I want to know that the people managing my pension are aware of all of this, and are investing in a way that will safely protect my savings.”

Pension funds must react to risks and opportunities

ClientEarth Company and Financial Lawyer Natalie Smith said: “The future wellbeing of millions of pensioners in the UK depends on the people who look after their pension savings. Climate change poses significant financial risks to investment portfolios and working people deserve to know that their funds are not only assessing and reacting to the risks but also considering the financial opportunities.”

The move comes as more and more major financial institutions draw clear links between climate change and economic risks, among them the Bank of England and the Financial Stability Board.

Catherine Howarth, Chief Executive of ShareAction, said: “Some pension funds, notably EAPF, are leading the way when it comes to managing climate risk, by developing and communicating robust investment policies that align with the low-carbon transition. But the fact is that the great majority of pension funds aren’t doing enough. We’re pleased to be supporting these savvy savers, who have taken matters into their own hands to make sure that their funds fulfil their duty to members by recognising and acting on these risks.”

Pension funds have legal duties to assess and manage financial risks to investment portfolios, including those brought on by climate change. While a few leading funds are exercising these duties, the majority, surprisingly, are not. ClientEarth and ShareAction’s initiative of working with pension fund members is aimed at bringing about greater accountability of pension funds.

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Annie Spratt