Mary Creagh, Chair of the House of Commons’ Environmental Audit Committee, has written to the UK’s 25 largest pension funds to find out how they manage the risks that climate change poses to savings.

The letter forms part of the committee’s inquiry into green finance.

Civil servants are concerned that pension funds are misinterpreting their “fiduciary” duty to their members as meaning they need to maximise short-term returns instead of considering longer-term implications, such as climate change.

In its evidence to the inquiry, the Department for Work & Pensions said: “We hoped that the publication of guidance on [considering environmental considerations where financially material] by The Pensions Regulator would address trustee confusion about their duties.

“However, recent research has suggested that a lack of attention and outright misunderstanding remain widespread among trustees.”

Financial risks of not adapting

Creagh added: “Climate change means insurance firms will be hit with increasing claims related to extreme weather.

“Energy companies that do not make a timely low-carbon transition risk being left behind.

“We want to know what pension funds are doing to safeguard people’s pensions from the financial risks of climate change.”

> Find out more about the committee's inquiry