Non-government organisations (NGOs) are putting pressure on trustees and managers of pension funds to fulfill legal duties relating to climate change risk – and warn that a test case might result if they do not.
ClientEarth and Asset Owners Disclosure Project (AODP) have teamed up to launch the Climate and Pensions Legal Initiative (CPLI) and say they want to work with pension funds to protect their investments from climate change risks.
Elspeth Owens, a barrister working with ClientEarth, says that while some funds do try to mitigate climate change risks and should be praised, many are failing to take the necessary steps.
“The gap between the best and the worst is widening. Those funds which are falling behind may be in breach of their legal duties,” she says.
The CPLI will examine the legal duties of pension funds and work with pension fund members to check that funds, and their asset managers, are complying with legal duties. The project could possibly lead to a test case if some funds continue to fall below the standards required of them.
AODP’s chief executive officer, Julian Poulter, says that pension fund members in a number of jurisdictions are frustrated with their funds’ lack of response to the very real financial risks posed by climate change.
He also says that pension fund members have been asking if there is a legal remedy if funds ignore risks caused by climate change.
Like Owens, he says it could result in the “world’s first fiduciary case in this area”. Poulton warns that such a case would be watched closely by every pension fund and every trustee in the world.
“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,” he says.
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