Managing climate crisis and pensions

Thank you for inviting me to speak to you today.

This year, the IPE conference and awards comes hot on the heels of COP26.

With $130 trillion committed to a low carbon economy, we can see the enormous tanker of global finance beginning to turn.

But, as COP President Alok Sharma made clear in his closing speech, we have a lot more to do.

A couple of weeks before COP26, the Environment Agency launched our third Report to Ministers under the Climate Change Act about how we are helping England prepare for climate impacts.

The report shows last year, more than 76,000 incidents were reported to the Environment Agency’s incident management service, including flood, drought, fires, fish kills and pollution incidents.

One every seven minutes, 24 hours a day.

Climate change is increasing their severity, frequency and duration. In the press release I said it is a case of “adapt or die”.

This summer, 200 people died in the German floods. In the last year we’ve also seen the devastating heatwave and flooding in Vancouver, the drought in Madagascar, and the polar vortex in Texas.

Everyone needs to Plan, Adapt and Thrive.

The goal is a new era of climate prosperity to the whole world.

And pensions can help deliver that.

Because we are talking about making sensible savings for people’s retirement.

People saving for a pension today do not want to be locked in a Catch-22 whereby their savings are contributing to a climate that will be much less hospitable by the time they retire.

But, don’t be fooled, there is no great generational divide here.

Parents and grandparents don’t want their children to inherit that world either.

Last year, the Environment Agency Pension Fund was delighted to win IPE’s ‘Best Pension Fund in the United Kingdom’ Award.

The Environment Agency Pension Fund is also one of the best funded schemes in the local government sector, returning on average a 10.7 percent return each year over the last 10 years.

We have a funding level of 111 percent, meaning our assets are larger than our liabilities.

This has allowed us to have one of the lowest employer contributions rates across local and central government, which – in turn – means the Fund is more secure and more Environment Agency income can go to further environmental outcomes.

The size of the Fund – £4.5 billion – is small compared to the £3 trillion in UK pensions alone.

But, our impact is much greater than the size of our holdings because we have led the way in finding strong financial, social and environmental outcomes.

Nine percent of our assets are invested in climate solutions, for example in net zero industrial warehouses in Wallingford, windfarms in Kenya, and in the public tram system in Nottingham.

This is the largest percentage of any pension fund we know of and – as of March 21 – equated to £363 million.

In April, the Environment Agency Pension Fund committed to net zero by 2045 and is currently five years ahead of meeting this target.

We would like to go further.

Four years ago, we launched the Transition Pathway Initiative with the Church of England National Investment Bodies to highlight which individual companies need to do more to move to a low-carbon economy.

Today, the TPI has supporters around the world who manage assets worth $40 trillion – these include large household names like HSBC, Scottish Widows, Legal and General, and the National Trust Pension Fund.

We need every sector in the economy to decarbonise – including energy – and TPI data allows informed conversations between investors and all carbon intensive companies.

It helps investors cut through greenwash.

And, if change is not happening, the data will give us a clearer vision of which companies are not committed to making progress…

…at which point the conversation is effectively over and we will have to divest.

The TPI shows how much can be achieved by two relatively small pots of money working on behalf of their beneficiaries.

I would like it to begin working with the Coalition for Climate Resilient Investment, because the world needs to prepare for climate shocks as well as to reduce emissions.

And, the Environment Agency Pension Fund has a focus on climate-resilient investments because we cannot insulate our holdings from a world where the wider economy is contributing to climate change.

I hope today’s conference is a great success.

Pensions have a huge role to play in delivering climate solutions, building resilience to climate shocks and restoring nature.

From campaigning organisations like Make My Money Matter and ShareAction to the mainstream of finance, people are waking up to their power as investors.

That is a great opportunity.

In a world of constant change, planning for the future means shaping the future.

I hope you all have a very good Christmas.

Thank you.

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