Pension funds around the world could be hit with up to 50% falls in returns due to the effects of climate change.
Independent research has found that North American pension fund returns could decline up to 50% by 2040, under a high warming scenario, if the current approach to setting and governing climate policy doesn’t change.
For the UK there’s better news but still the potential for falls of around 30% by 2040
The report says: “Rising temperatures, increasing extreme weather events and declining agricultural productivity will collectively reduce asset performance across all asset classes, with some Canadian, US and UK pension funds potentially facing a drop in investment returns by over 50% by 2050 if climate change impacts are not restrained.”
Across Europe, Swiss and Dutch pension funds are comparatively less affected by rising temperatures due to their lower geographical exposure to extreme climate events and substantial allocations to less vulnerable assets.
The results are from a study by Ortec Finance, which analysed the publicly available data from more than 140 pension funds in the US, Canada, the UK, the Netherlands and Switzerland.
Doruk Onal, climate risk specialist at Ortec Finance said: “The decline in investment returns has serious implications.
“For pensioners, reduced returns could lead to lower retirement benefits and financial insecurity. Sponsors, including corporations and government bodies, might face increased contributions to cover shortfalls, impacting their financial health.”
