Pension funds have adopted tactics to address climate concerns by amplifying green investments and divesting companies that don't meet climate and ethical criteria
In a recent study by Columbia University, World Bank, and Sustainable Finance Institute, major pension funds from around the globe have showcased their commitment to combatting climate change through sustainable investment strategies.
The study delved into the approaches of five pension funds: Canada Pension Plan Investment Board, Japan's Government Pension Investment Fund, Netherlands' Stichting Pensioenfonds ABP, Norway's Government Pension Fund Global, and New York State Common Retirement Fund.
All five funds have embraced renewable energy, proactively assessing the environmental impact of potential investments before allocating funds. Despite market fluctuations, these funds demonstrated resilience, with some experiencing marginal growth or minor losses in their most recent fiscal year.
Each pension fund adopted tactics to address climate concerns and amplify their green investments. For Norway's Government Pension Fund Global, which draws revenue from oil and gas operations, the challenge was substantial. The fund took measures to avoid coal-associated investments and parted ways with companies that didn't meet climate and ethical criteria. The fund's efforts resulted in divestment from 282 non-compliant entities.
New York State Common Retirement Fund, with a commitment to achieving a net-zero portfolio by 2040, took a firm stance against fossil fuels. Divesting from shale oil and gas, the fund focused on renewable energy. It introduced a unique low-carbon index and financially supported climate-related shareholder proposals.
Canada Pension Plan Investment Board, recognized for its real estate and infrastructure investments, owned ‘green-certified’ buildings globally and partnered with a Brazilian hydropower company. The fund's issuance of green bonds raised capital for renewable energy projects.
Japan's Government Pension Investment Fund, the world's largest public pension fund, centered its efforts on reducing carbon influences. It adopted green bonds and invested in low-carbon stock indexes while transparently disclosing its portfolio's carbon footprint.
Netherlands' Stichting Pensioenfonds ABP committed to slashing its portfolio's carbon footprint by 40% by 2025. The fund advocated against deforestation in supply chains. Despite challenges, these actions demonstrate its dedication to sustainable practices.
“Despite well-articulated climate strategies, many pension funds fail to define their objectives in numeric terms,” the report said.
Nonetheless, the report commended the pension funds for “acting on climate risks and opportunities” and that “their innovative approaches provide an example of how other funds can follow their lead.”
