Is climate change a risk to retirement savings?

Trustees at the UK's top 25 pension funds have until the end of the month to tell the British parliament what steps are being taken to safeguard $977 billion of retirement money from the impact of climate change.

The Environmental Audit Committee's inquiry into "green finance" wants to know if pension funds have devised investment strategies to tackle climate change-related risks.

"Climate change means insurance firms will be hit with increasing claims related to extreme weather. Fossil fuel companies could lose value as the world implements the Paris Agreement on climate change to keep to below 2A,C. Energy companies that do not make a timely low-carbon transition risk being left behind," British MP Mary Creagh, who chairs the committee, said.

Energy giant British Petroleum's $43.5 billion pension fund and Shell's $28 billion contributory pension fund are among the ones queried.

Disclosures to the inquiry will be voluntary - but whether or not this is sufficient to encourage future financial disclosures is one of nine questions asked in a letter sent  to the pension funds.

The inquiry was triggered by a G20 taskforce which reached out to more than 100 companies with $14.1 trillion in assets including AXA and Aviva.

It was found climate change could hit investments in two ways: the risks of transitioning to a low-carbon economy, and the risks stemming from physical changes.

The Task Force on Climate-related Financial Disclosures (TFCD)'s final recommendations, released in June 2017, aimed to develop a framework for companies to make financial disclosures in a consistent manner.

The funds have until March 28 to respond.

Read more: UKAvivaAXABritish MPBritish PetroleumEnvironmental Audit CommitteeMary CreaghParis AgreementShell
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