New research from Cushon and the University of Exeter advises pension funds to move past net-zero targets and increase exposure to climate-resilience projects, warning that current economic models may miss key financial threats.
Physical risks already impacting assets
The joint paper, titled Investing in Resilience: Unlocking Pension Capital for Climate Adaptation, notes that UK holdings are feeling the effects of extreme weather, while limited investment opportunities and modest government backing hinder the flow of capital into adaptation work.
Four improvements are proposed: richer data on physical hazards, a deeper pipeline of suitable projects, clearer policy direction and incentives, and tighter coordination among regulators, public finance bodies, pension providers and asset managers.
Economic modeling of climate damage
Standard climate-risk models often overlook severe storms, tipping points and the overlap of multiple threats, which could lead to underestimation of economic loss.
University of Exeter’s Green Futures Solutions calculates that annual damage to UK gross domestic product could reach 2.8 per cent under a 2 °C warming path, climbing to 7.1 per cent in a 90th-percentile scenario.
The analysis highlights the East of England as especially vulnerable, with flood, heat and drought risks threatening farms, ports and energy networks.
Pension capital and policy response
The authors recommend directing funds toward sturdy infrastructure, flood barriers, heat-shielding measures, nature-based options and upgrades to existing assets.
Many adaptation initiatives currently lack the scale, investment structures or commercial incentives needed to draw sizable defined-contribution (DC) inflows.
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Recent data from the first Mansion House Accord progress report show £22.1 bn of DC growth-phase assets placed in private markets by the end of 2025, with £11.1 bn already deployed in UK deals and a further £3 bn earmarked but not yet spent.
Martin Logan, Cushon’s sustainability manager, said: “As a Mansion House Accord signatory, Cushon is committed to turning intent into investable allocations. Providers already have £11.1 bn at work in UK private markets, which is a strong start, and the £3 bn pipeline shows momentum is building.”
Logan added that while physical threats are evident, the pipeline for pension-scale adaptation projects remains thin, positioning resilience as the next growth area.
The paper proposes government-backed incentives akin to the Contracts for Difference scheme that underpins renewable energy, suggesting Outcome Purchase Agreements that tie payouts to measurable resilience gains such as reduced flood damage.
Such mechanisms could deliver clearer long-term return expectations, making adaptation projects more attractive to pension investors.
Creating a richer flow of projects that meet DC criteria would enable trustees to evaluate opportunities against fiduciary duties, governance standards and scale requirements.
Dr Jesse Abrams, senior impact fellow at the University of Exeter, stated: “Pension capital is well suited to long-term challenges, but the market needs clearer data, stronger project pipelines and policy support. The accord creates real momentum; now we should use it to make the UK economy both more productive and more resilient.”
