What does climate change have to do with your pension plan?

Everywhere you look, people are jumping on the green bandwagon. And magazines are no exception.Whether it’s Leonardo DiCaprio posing on an iceberg for the cover of Vanity Fair, Arnold Schwarzenegger grinning on a recent cover of Canadian Business or Al Gore on the cover of just about everything, it seems the media has caught the global warming bug.

So when the idea of a green issue for benefits canada came up, the obvious question was What does climate change have to do with pensions? Quite a lot, as it turns out. It seems global warming isn’t just an issue for environmentalists, moviestars- turned-politicians and politicians-turnedmovie- stars. Rather, it can—and already is—having a material impact on pension fund investments.

As governments around the world introduce measures to reduce carbon emissions—whether emissions trading schemes, intensity targets or carbon taxes—they will have serious implications for the companies, sectors and economies in which pension funds invest. Companies and industries that are heavy emitters of carbon will be negatively affected, while those that are ahead of their competitors in addressing climate change or who are developing new sustainable technologies will stand to profit.

Because of the investment risks associated with climate change, many trustees now accept that factoring it into investment policies is not only a wise thing to do, but a fiduciary obligation.

Doing a quick Web search, one soon discovers that pension funds and institutional investors around the world are taking the climate change issue very seriously. And pension funds in some countries are way ahead of Canada on this issue. Not only are they already considering these factors when making investment choices, but they’re also being proactive about addressing climate risk. In some cases, pension funds have joined forces to put pressure on governments to introduce longterm and predictable policy frameworks. In other cases, institutional investors are pushing companies to disclose their carbon emissions and climate risk strategies. Others are finding investment opportunities in areas such as clean energy.

As such, we’re pleased to bring you this special issue of benefits canada. Our report examines the financial and fiduciary risks associated with climate change. It also looks at how pension funds in Canada and around the world are responding to both the investment risks and opportunities posed by global warming.

Welcome to the bandwagon.

Don Bisch is the editor of BENEFITS CANADA. don.bisch@rci.rogers.com

For a PDF version of this article, click here.

© Copyright 2007 Rogers Publishing Ltd. This article first appeared in the July 2007 edition of BENEFITS CANADA magazine.