The annual report investigated the impact of climate change on pension scheme investments, examining 180 pension fund portfolios across the UK, US, Canada, Australia, the Netherlands and Switzerland.
Its limited action scenario assumed a 2.8°C increase in warming by 2100. Warming at this level could cut long-term investment returns by 10 per cent to 30 per cent by 2050 relative to current expectations.
Ortec Finance said its high warming scenario assumed a 3.8°C increase in warming by the end of the century. This would reduce annual global growth by around 1.6 percentage points by 2065. The global economy would be around US$58tn smaller than its current growth trajectory.
Maurits van Joolingen, Ortec Finance managing director, climate scenarios and sustainability, commented: “To fulfil their fiduciary duty, pension funds must understand climate change as both an asset-level and systemic risk.
The report found that climate change is expected to affect pension fund portfolios across all major markets. Australian, Canadian and US schemes face the greatest projected impacts. Dutch and Swiss funds appear relatively more resilient.
Maurits van Joolingen added that the challenge for investors is understanding how climate-related risks interact and vary across regions, while ensuring portfolios remain resilient as physical climate risks become increasingly important alongside traditional financial risks.
The research also highlighted insurance affordability as an early warning sign for investors, and that climate change could increase sovereign credit risk, with implications for pension fund investors.
