Pension funds that fall short of assessing and mitigating risks arising from climate change could be in breach of their legal duties, warn two non-governmental organizations.
ClientEarth and the Asset Owners Disclosure Project on Thursday launched their Climate and Pensions Legal Initiative. They will work with pension fund participants to challenge trustees and pension fund managers to fulfill their legal duties to protect investments.
“Climate change is a serious financial risk for investors and could have a major impact on pension savings if not proactively addressed by pension funds,” said Elspeth Owens, a ClientEarth lawyer. “Pension funds have a legal duty to assess and manage material financial risks, including climate change risks.”
Ms. Owens said that while some pension funds are working on these risks, many are “failing to take any steps, and the gap between the best and the worst is widening.”
The initiative will examine the legal duties of pension funds to address these risks, working with money managers and pension fund members to ensure compliance. The project could lead to a legal test case, should pension funds continue to fall below the required standards, said a news release by the AODP.
“Here in the U.K., and elsewhere, (pension fund participants) 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,” said Julian Poulter, CEO at the AODP. “It is time for trustees of laggard funds to disclose their plans for mitigating climate risks and wake up to the reality that short-term markets are not going to deal with long-term climate risks appropriately for their members.”
A spokesman for the AODP said this is a global project, but that the initial research ahead of any possible action will be focused on the U.K.