ClientEarth has written to 12 largest pension funds warning that investing in fossil fuels could lead to legal risk.
ClientEarth lawyer Catriona Glascott warned that while pension scheme bonds holdings “span decades”, many include “some of the riskiest investments long-term: fossil fuels”.
“Fossil fuel projects have a high chance of being rendered obsolete in coming decades as the world’s energy system transitions to renewables,” Glascott added.
“Pension beneficiaries are having their funds thrown behind risky projects for potential short-term profits – a strategy that risks undermining long-term reward for customers.”
Last month it was revealed that £16 billion of the Local Government Pension Scheme (LGPS) is investing in the fossil fuel industry.
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The ClientEarth lawyers highlighted that many pension schemes have committed to transition to a net zero portfolio and claim that climate change underpins their investment strategies.
However, a significant amount of pensions money remains invested in fossil fuels.
These schemes are bound by existing legal duties – known as fiduciary duties – to protect their beneficiaries.
Schemes are increasingly being required to demonstrate to regulators that they have properly considered the risk climate change poses to their portfolios.
“Pension schemes – which promise a secure future in principle – have the chance to make that both a planetary and material reality for beneficiaries,” added Glascott.
“They can make bond financing dependent on climate commitments and ensure that credible company transition plans are a condition for investment.”
