The Society of Pension Professionals (SPP) has published Pensions in a Warming World, a thought leadership paper warning that climate change is becoming a defining factor in pension outcomes, funding strategies and retirement security across the UK.
The report makes the case that climate change is no longer simply an environmental issue. It says it is an economic, financial and governance challenge that could reshape investment returns, inflation, employer covenant strength, insurance markets and the long-term value of pension savings.
With UK pension schemes responsible for trillions of pounds of assets and retirement promises stretching decades into the future, the paper claims that pension schemes cannot diversify away from a changing climate.
The SPP's analysis examines how different climate pathways, from early and co-ordinated action to delayed transition or escalating physical impacts, could lead to dramatically different financial outcomes for Defined Benefit (DB), Defined Contribution (DC), Collective Defined Contribution (CDC) and public sector pension schemes.
The report concludes that while climate risks remain uncertain, the cost of ignoring them is increasingly clear.
Among the SPP report's key findings:
- Climate change is a financially material risk affecting investment returns, funding positions and retirement outcomes
- Delayed action may increase exposure to market volatility, policy shocks and systemic economic disruption
- Physical climate impacts are increasingly affecting insurance markets, infrastructure, property and economic productivity
- Pension schemes face growing governance challenges around data quality, regulation, fiduciary duties and stakeholder expectations
- Effective climate governance is becoming a core component of prudent long-term pension management
As climate risks intensify and pension schemes increasingly focus on long-term resilience, the report calls for a more informed debate about how the UK pensions system can deliver good member outcomes in an increasingly uncertain world.
Society of Pension Professionals President Calum Cooper, said:
“Climate change is no longer a future risk for pension schemes, it is a present-day financial reality.
“The decisions trustees, policymakers and investors make over the next decade will help determine not only the value of pension assets, but the retirement outcomes of millions of savers.
“Put simply, you can’t separate the future of pensions from the future of the economy. And you cannot separate the future of the economy from climate change. That means that climate risk is now retirement risk.”
The guide is available to all, in full, for free, here: https://the-spp.co.uk/document-category/guides-and-reports/
