Welsh pension fund agrees to new climate risk policy

A WELSH pension fund has a new policy which accepts that climate change has the potential to disrupt economic systems and is a financial risk for its investors.

The Wales Pension Partnership (WPP), which pools assets from eight local government pension schemes, already had a responsible investment policy.

Addressing the WPP’s joint governance committee, pension consultant John Wright said: “Among the issues you covered in your responsible investment policy, you identified climate risk as one of the specific concerns in the stewardship of WPP investments because of the potential harm to asset values and investment returns.”

The committee went on to approve the new climate risk policy, with one amendment.

The policy includes objectives and how to implement them, and monitoring.

The new policy said climate change may result in mis-priced assets as well as “unique investment opportunities”.

It also said there were financial risks arising from changes in policies and technology to adjust to a lower-carbon economy.

The immediate focus, it said, will be climaterelated risk exposure within its shareholdings.

On implementation, the policy said: “The WPP expects its investment manager to ensure that all underlying active managers integrate the consideration of climate-related risks into their investment process and to regularly challenge underlying managers to evidence their approach.”

WPP investment managers will have to provide monitoring on climaterelated risk exposure in their quarterly reports.

The pension fund will also continue to apply climate risk focus by engaging with companies it invests in and through voter rights.

There will be an annual report on the climate risk policy, but the eight constituent pensions schemes will be responsible for their own investment strategy including climate risk policy.

“So you may decide to do more as it becomes possible to do more,” he said.