The Government’s Actuary Department, which provides analysis, risk assessments and modelling for the UK public sector, has said it will include climate change in its valuations of public service pension schemes.
The department will look at climate change impacts including life expectancy, government spending priorities and economic and other macroeconomic variables.
For each public service pension scheme three scenarios have been considered:
- An orderly transition: Which is estimated at up to 1.5 C above pre-industrial temperatures by 2100),
- A disorderly transition: Which is estimated at between 1.5 C and 2 C above pre-industrial temperatures at 2100)
- A failed transition: Which is estimated at 4 C above preindustrial temperatures and includes a failure to adapt and mitigate climate change at a global level.
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Using the framework, scenario analysis has been used to illustrate potential implications for the schemes at future valuations.
The climate change impacts are expected to impact GDP growth, for instance by impacting health and supply chains.
It comes after an EU watchdog highlighted last year that climate change could cost pension funds billions due to their investments in polluting industries that do not aim to mitigate climate damage.
Earlier this year the Church of England Pension Fund divested its investment in fossil fuel companies including BP and Shell.
Banks have also come under fire for not doing enough to ensure their investments are sustainable – with big names including Barclays coming under scrutiny.
Richard Curtis and Stephen Fry are among celebrities to have campaigned for people to switch to greener banks via the Make My Money Matter fund.
Speaking at Blue Earth Summit in Bristol, a panel discussed the issue at length and highlighted the importance of chain in the sector.