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Carney warns of climate change threat to pension funds

Carney warns of climate change threat to pension funds

Bank of England governor Mark Carney has warned pension schemes are at risk due to climate change unless they cut their investments in fossil fuels. 

The outgoing BoE chief made the comments in a pre-recorded BBC Radio 4 interview broadcast today (30 December). 

He warned unless firms woke up to the 'climate crisis' certain assets would become worthless.

Mr Carney said: “A question for every company, every financial institution, every asset manager, pension fund or insurer: what’s your plan?"

He added: “Four to five years ago, only leading institutions had begun to think about these issues and could report on them.

“Now $120tn worth of balance sheets of banks and asset managers are wanting this disclosure [of investments in fossil fuels]. But it’s not moving fast enough.”

He told the BBC pension fund analysis had shown the policies of all companies combined were consistent with a warming of 3.7-3.8C - "far above the 1.5 degrees that the people say they want and governments are demanding”.

In May this year, the government’s Environment Audit committee published the responses it received from 25 of the largest pension funds detailing their approach to climate change risk and whether it was incorporated into their decision making. 

MP Mary Creagh, who chairs the committee, found a minority of funds were complacent about the risks climate change posed to their investments. 

Mr Carney is to leave his post at the Bank when his tenure ends at the end of January to become the United Nations Special Envoy for Climate Action and Finance.

His tenure saw the BoE launch a “stress test” to determine which firms and sectors would be most adversely affected by climate change.

Mr Carney will be succeeded at the Bank by current Financial Conduct Authority chief executive Andrew Bailey.

The FCA published in July 2019 a joint declaration with the Prudential Regulation Authority, the Pensions Regulator, and the Financial Reporting Council, welcoming the publication of the government’s Green Finance Strategy, which has been designed to strengthen the competitiveness of the UK financial sector and drive progress towards the UK’s 2050 net zero target.

This is to be achieved through enhanced corporate disclosure, sustainable finance standards and investment in green projects.

saloni.sardana@ft.com