GLOBAL – A new report has warned pension fund trustees that they need to consider climate change if they want to do the best for their beneficiaries.

“Given the potential impact that climate change may have on financial performance, trustees have yet to recognise that they have a responsibility to consider climate change if they are to act in the best interests of their beneficiaries,” the report states.

The 57-page ‘Climate Change & the Financial Sector’ was written by consultant Andrew Dlugolecki with the backing of environmental group WWF and insurer Allianz.

Institutional investors were “finding it difficult to make the link between climate change risk and investment risk” Dlugolecki states.

“Consequently they are not actively instructing their fund managers to take the issue into consideration in the running of their assets.”

He told a briefing that this was partly due to a “complex chain” of decision-making and poor data from companies

The report acknowledges that trustees face other challenges, leaving limited time to focus on climate change.

“Being prudent investors, pension fund trustees need the appropriate tools to help them understand the implications of climate change on their investments and instruct their asset managers accordingly,” the report adds.

“Alternatively, they may look at he possibility of diversifying their assets into investment vehicles that provide a hedge against climate change risk.”

Dlugolecki added that for investment consultants, climate change issues were often “pigeon holed into socially responsible investment, which is seen as potentially interfering with trustee fiduciary duty”.

And “mainstream” asset managers tended to marginalise the issue, he added.