ClientEarth and the Asset Owners Disclosure Project (AODP) have teamed up to launch the Climate and Pensions Legal Initiative (CPLI) today. The NGOs will work with pension fund members to challenge trustees and managers of pension funds to fulfil their legal duties to protect investments from the very real financial risks posed by climate change.
ClientEarth Barrister Elspeth Owens said: “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. Pension funds have a legal duty to assess and manage material financial risks, including climate change risks.
“Some pension funds are to be applauded for their positive approach to assessing and mitigating these risks. However, many funds are failing to take any steps, and the gap between the best and the worst is widening. Those funds which are falling behind may be in breach of their legal duties.”
The CPLI will examine the legal duties of pension funds to address these risks and will work with pension fund members to check that funds, and their asset managers, are complying with their legal duties. The project could lead to a legal test case if some funds continue to fall below the standards required of them.
AODP’s CEO Julian Poulter said 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.
“Here in the UK, and elsewhere, they 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,” Poulter said. “Every member in every fund has a right to expect their funds to carry out proper analysis on the various scenarios around climate risk, deciding either to mitigate or carry the risk. Now is the time to find out if those funds who have not done this are in breach of their duties.”
Such a case would be watched closely by every pension fund and every trustee in the world, Poulter warned. “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”.
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