Imminent changes mean people’s pensions should soon be invested in ways that reflect the risks to investments from things like climate change, but also the opportunities in areas such as electric vehicles. The driving force was a statement from the Law Commission last year that said the law requires pension schemes to consider “all financially material factors”. Such as what? Well, we already know the probable financial impact of climate change is huge. If we are to keep climate change to well below 2C then we can only burn a third of the oil owned by oil companies, so two thirds of their oil must stay in the ground.
That is clearly material to pension schemes invested in oil. More widely, the governor of the Bank of England has said that perhaps a third of the value of global shares and bonds is exposed to changes in the use of oil and other hydrocarbons that are essential. When you consider other issues – the need to use less plastic, not to deplete non-renewable resources, to treat stakeholders in all countries well and not just those in the West – the scale of value at risk from the range of ESG issues is huge.