European funds came out on top on dealing with climate change duties, with five funds in Sweden and the Netherlands achieving leading ratings, a new study from Asset Owners Disclosure Project (AODP) has found.

Three of the top four (AP4, Fonds de Réserve pour les Retraites and ABP) were European based and five funds in each of Sweden and Netherlands received a leading rating. UK pension funds were found to be lagging behind their European counterparts.

Despite this, over 60 per cent of the world’s largest public pension funds are in danger of beaching their legal climate change duties.

AP4 CEO Niklas Ekvall said in a statement: “AP4 has identified climate change as the single biggest systematic threat to asset values in the long term, and therefore we have taken action to ensure our investment portfolio supports the low-carbon transition through investment and engagement activities.

“We hope our ambitious agenda in line with the TCFD recommendations will have an impact and be an inspiration to other investors towards a solution to the global climate challenge that we currently experience,” he said.

The study highlighted that 63 of the 100 largest pension funds have little to no strategy when it comes to climate change and risk not meeting the new Task Force on Climate-related Financial Disclosures regulations.

The 63 funds where little to no information regarding the financial implications of climate change was presented have been warned that they may be exposed to heightened litigation risks.

AODP analyst, Felix Nagrawala commented: “AODP is turning up the heat on public pension funds who fail to address climate change in their investments. Pension funds have a duty to serve the long-term interest of their members, which isn’t being met if the money they invest is depleted along with the health of the planet.”

However, less than one per cent of the assets of those surveyed were invested in low-carbon solutions and only 10 per cent have a policy to exclude coal from their investment portfolio.

The report said that pension funds taking a leading role in promoting environmentally friendly investments is key to making a difference as the industry accounts for one third of all asset owners’ investments globally.

Ceres senior director, international investor engagement, Chris Fox, concluded: “AODP’s research provides a powerful overview of the climate performance of the global pensions industry, and clearly highlights the need for deeper action towards aligning pension investments with the <2C goal. We hope the ranking will be a wake-up call.”

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