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Pension funds must become 'climate conscious investors'

31 October 2013

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Pension funds in the UK must do more to recognise the growing financial risks of climate change, non-governmental organisations (NGOs) and unions have said.

According to a report, which has been launched in light of the Green Light campaign, pension funds have the responsibility to protect the public and their pension savings from the risks associated with climate change.

The report stated that younger savers are particularly exposed to the financial implications of climate change and natural resource scarcity, and said the pension funds have the responsibility to become more 'climate conscious investors'.

Regarding the report, pensions minister Steve Webb said: "This report will set the agenda for years to come and in my opinion rightly so."

British pension funds are currently responsible for the equivalent of almost a quarter of UK greenhouse gas emissions through the companies they invest in.

The report outlines steps that pension funds can take to become 'climate conscious investors' including: reporting to their fund members how they evaluate and manage climate risks; investing in low carbon industries and climate mitigation technologies; and disrupting the flow of capital to fossil fuel projects that bring on stream new sources of carbon.

ShareAction has helped to co-ordinate the campaign and its CEO Catherine Howarth said: "The pensions industry is burying its head in the sand - just as it did in the run up to the financial crisis. The compelling evidence of a warming planet in the IPCC's 5th assessment report demands a thoughtful response by trustees and investment professionals charged with overseeing the nation's private pensions."

She added: "Pension savers are rightly demanding urgent action to protect their savings and their future quality of life by focusing on the economic risks of climate change. A growing chorus of voices is challenging our pension industry's complacency about the climate stability we depend on."

The campaign has been launched a week after Prince Charles warned the pensions industry that unless a sustainable financial system is created, investors risk condemning future generations to a "miserable future".

David Nussbaum, Chief Executive at WWF-UK said: "The recent IPCC report gives us the clearest signal yet of the threats posed by a changing climate, and highlights the need to act decisively to address the problem.

"Investors need to play their part, recognising that continuing to invest in high-carbon assets stores up huge financial, economic and social risks. The successful businesses of the future will be the ones who value, manage and restore natural assets and limit their exposure to risks such as those presented by a changing climate."

First published 31.10.2013

monique_simpson@wilmington.co.uk