European pension fund trio backs climate risk investment project

Several European pension funds, including Sweden’s AP1, are launching a project on climate change risks they say could help inform portfolio decisions in the future.

Dutch pension funds PME, the €46.7bn metals scheme, and Philips Pensioenfonds, are also involved. Alongside Dutch insurer ASR, Canadian pensions manager OPTrust and financial technology firm Ortec Finance, the three pension funds – which have nearly €100bn in assets between them – described the work as a “cutting-edge research project to integrate climate change into strategic investment decisions”.

Mikael Angberg, CIO at AP1, said: “Better knowledge of how climate change might affect risk and returns is crucial for our long term performance. 

“Participating in this climate study will not only deepen our understanding but also be an important input in articulating our climate strategy.”

The pilot study aims to integrate quantified risks linked to climate change into standard forward-looking financial scenario sets that are behind strategic investment decision-making, the participants said.

Investors involved in the work will use these data sets to analyse the effects of various possible global warming sequences on their asset liability management/strategic asset allocation.

The pilot is expected to run until the end of 2018, and if successful, the “climate-savvy scenario set” is expected to be made more widely available to investors by early 2019, the participants said in their joint statement.

Other firms taking part in the project include Cambridge Econometrics and Carbon Delta, while various research organisations and universities are also involved. Earlier this year Ortec Finance announced it had created a “strategic climate solutions” team.

Meanwhile, Danish labour-market pension fund Sampension announced it has decided to adopt the Task Force on Climate-related Financial Disclosures (TCFD) guidelines, becoming the fifth Danish pension fund to do so.

Hasse Jørgensen, Sampension’s chief executive, said: “We will use a measuring tool used by TCFD to calculate the carbon footprint (…) of our investment portfolios.”

Knowledge and specific measurement methods for how the climate affected companies – and therefore the basis for Sampension’s investments – were a very useful way forward, he said, giving a better opportunity to determine and price financially-material risks related to climate impact.