Climate change is both an environmental and humanitarian disaster for this planet, and it’s becoming increasingly obvious that it will be an economic tragedy as well.
A stark warning from the Governor of the Bank of England has declared that climate change could start to have an affect on international financial systems with inexorable ramifications.
A considerable amount of UK pension funds are invested into oil and gas companies. These companies are on the slide, and 90% of fund managers expect to see their valuations significantly impacted over the next 2 years according to a report by the UK SIFA. The reason for this slide is climate change. There is a global consensus for cleaner, greener energy after the ratification of the Paris Agreement in 2016. Many world leaders, Donald Trump aside, have committed to reducing their dependency on fossil fuels, to minimise their carbon footprint and to take major steps towards protecting our planet. As a result, national infrastructure will reshape itself around this on a global scale thus reducing the demand for oil and gas companies over the coming decades.
It is shocking to hear that 41% of investors still do not have a plan for engaging with oil and gas companies on this issue. This essentially means that the members of these schemes are bearing all of the investment risks. If your employer is investing in a failing industry to secure your long term financial future, then this is clearly not a sustainable model to ensure your pension pot is actually waiting there for you when to get to retirement age.
The Green Finance Taskforce has demanded clarity of investors fiduciary duties, as it is essential that the UK financial system has as much time as possible to respond to the challenges posed by the changing climate. It is vital that this government and the FCA introduce new measures to ensure the environmental, social and governance factors are properly considered by all pension schemes, and to protect employees financial futures from the risks associated from climate change.
Wera said: “Protecting the financial future of millions of people in this country is of the utmost importance and much more needs to be done to make sure we have a proper system in place to do this. Climate change is the biggest existential threat to this planet; in Bath we are committed to taking steps to reducing our air pollution to help tackle this crisis.”