A number of certainties were clear at this year's Pensions and Lifetime Savings Association investment conference: that climate change is a very real risk; that growth is and will remain hard to come by; and that innovation and disruption are lacking in the money management and retirement industries.
The association's annual investment conference, which took place in Edinburgh, March 9-11, this year opted for “creating certainty in an uncertain world” as its theme. Over the three days, delegates heard from industry experts on a number of topics, including the Financial Conduct Authority's study into where the money management and consulting markets are failing pension funds; the upcoming referendum on the U.K.'s future standing as part of the European Union; and how to cope in a crisis, from none other than Yanis Varoufakis, Greece's former minister of finance.
But one thread ran through many of the conversations, despite only one session being devoted to the topic: climate change.
“Paradoxically, institutional investors are certainly the largest investment sector, but you are, (in) comparison to the size, the least engaged in climate finance,” said Christiana Figueres, executive secretary, United Nations Framework Convention on Climate Change, in a panel titled “The Climate Challenge: Investing for Tomorrow's Pensioners.”
“I am here to ring a bell of alarm for you, and to tell you frankly that (you) can, should and must change. Because of the risk — because of the risk to the global economy, that's why.”
Ms. Figueres said that institutional investors, as long-term investors, “are the best positioned to make a choice as to what kind of infrastructure we are going to build in the next five to 10 years: You play an extraordinary role in stabilizing the economy over the long-term — and I'm sure you are aware of the fact that central banks, who usually play that role complementing yours, have actually run out of ammunition. They have reduced interest rates to the point where some of them are paying negative interest rates. What kind of financial world do we live in that we now have (that)?”
Ms. Figueres said climate change carries a huge financial risk, and said high-carbon assets should carry a warning label similar to that on tobacco products, reading: “These investments can be dangerous to your financial health, to your economic health and certainly to the world.”
She hit home the role that institutional investors have to play in alleviating climate change risk by telling delegates there is “a huge, huge opportunity for you to be playing your role in history, to your own advantage.”
One highlight from the conference was a panel of retirement plan executives discussing what keeps them awake at night. While the issue of low interest rates came up throughout the conference, this discussion also addressed the lack of growth.
“From a pension fund perspective we have never had to work harder to identify other ... sources of growth,” said Faith Ward, chief risk officer at the £2.7 billion ($3.8 billion) Environment Agency Pension Fund, Bristol, England. “The long-term prospects for growth globally are very lackluster, and therefore we are having to work really hard.”