Shropshire Council in the UK has reacted to yesterday’s publication of surprisingly mild climate-impact estimate figures that its staff pension fund gave members, saying this happened some time ago and the numbers have since been updated.
The UK local authority, which runs the £2.34bn (€2.74bn) Shropshire County Pension Fund, also commented on the shortcomings of climate analysis data in general and stressed its commitment to climate engagement to speed up the change to a low-carbon economy.
IPE asked the council to comment on figures cited in a new report by Carbon Tracker which criticises pension funds and advisers for claiming that substantial global warming will only have a minimal impact on portfolio returns.
The authors of the report said consultancy Mercer – which advises pension schemes – had estimated that global economic damage from a 3°C global warming trajectory would be just 0.5% of GDP in 2050.
They also said Shropshire County Pension Fund had told members that a trajectory leading to 4°C by 2100 would only reduce annual returns by 0.1% by 2050.
A spokesperson for Shropshire Council said: “The data quoted in the Carbon Tracker report is taken from the funds 2020 TCFD [Task Force on Climate-related Financial Disclosures] report and reflects the predictions made in the Mercer climate change analysis at that time.
“The fund has issued two further TCFD reports since this time and whilst we cannot comment directly for third parties we welcome the continued development of climate scenario analysis to support the pension funds’ management of the risks associated with climate change,” they said.
“The analysis in our pension fund’s third Climate-Related Disclosures Report, published in November last year, was based on an updated model that Mercer has developed in partnership with Ortec Finance and Cambridge Econometrics,” the spokesperson said.
Mercer yesterday responded to the report, saying it was “disappointed that Carbon Tracker’s report presents an incomplete, and therefore misleading, summary of Mercer’s climate change analysis”.
At Shropshire Council, the spokesperson told IPE: “We are aware that climate scenario analysis is a developing field, which uses assumptions about inherently unpredictable matters over long-time horizons.
“We view the outputs from the analysis as directional information on the sensitivity of the pension fund’s portfolio to different climate scenarios to be considered in tandem with all other factors which potentially affect investment returns,” the spokesperson added.
“The results show that a successful transition is much better than a failed transition in terms of the investment returns and therefore our determination remains to engage with companies and policy makers in an effort to accelerate that transition in line with our fiduciary responsibilities,” the council spokesperson said.