Report: Climate change seen as fiduciary risk to pension fund trustees

Pension fund trustees face fiduciary legal risks from financial losses caused by climate change, according to a report to be released Monday evening by an Australian-based climate change risk group.

The report on fiduciary duty of trustees of pension and superannuation funds “indicates there are significant legal risks in the event of financial losses caused by climate change impacts, both physical and regulatory,” according to a statement from The Asset Owners Disclosure Project, an independent global not-for-profit organization focused on protecting retirement savings from the risks posed by climate change.

AODP commissioned the law firm of Baker & McKenzie “to study the evidence for trustee obligations over climate change,” a statement about the report said.

“The AODP/Baker & McKenzie report has found that trustees' understanding of climate risks was reasonably advanced, but that action taken to manage climate risk had been very limited,” the statement said. “It concludes that this gap between understanding and action represents a clear legal risk to trustees.

“The AODP wrote to the world's largest 1,000 funds in July, seeking disclosures of climate risk strategies,” the statement said. “Few funds have bothered to respond so far.”

Julian Poulter, AODP executive director, said in the statement, “We currently have a situation where most funds refuse to disclose publicly or even to their own members how they manage climate risks. … Such resistance to transparency will surely only add to their legal exposure once the low-carbon economy begins to impact the value of their fossil fuel based investments.”