We all know that climate change is real, that it’s already here, and that it is going to have a profound affect on the lives of every human being. It will transform the global economy and we need to be ready for it. We need to ready our financial systems for any impacts caused by climate change.
Climate Risk & Maryland Public Pensions
1. What is Climate Risk?
Climate risk is a term for the financial risks that climate change imposes on an asset. These risks include factors such as:
- The risk from stranded assets (unusable fossil fuel reserves) as we transition away from fossil fuels
- The risk from the physical effects of climate change like rising sea levels
- The risk from the impact of regulatory changes
- The risk from climate related litigation
Like any financial risk, investors need to be aware of the risks that come from climate change and include them in their investment decisions.
2. Do Our State Pensions Adequately Account For Climate Risk?
No, they do not. The Maryland State Retirement and Pension Systems have no policy that specifically requires analysis and reporting on climate risk.
3. What Could Happen if We Ignore Climate Risk?
Research shows that climate risk is a serious and growing risk to the financial health of investment funds. Citigroup estimated in 2015 that over $100 trillion in assets are at risk just in the fossil fuel sector alone. Major institutional investors like Vanguard and Blackrock are increasingly requiring climate risk assessments from companies. Yet Maryland pensions do not require this level of disclosure, despite the fact that they have long-term investment commitments to our state retirees.
4. Will Addressing Climate Risk Help Fight Climate Change?
Yes. As pensions make it clear that they don’t see companies who ignore climate change as good investments, they pressure companies to orient their businesses around a low carbon economy instead of supporting climate denial or fighting needed policies.
5. What Needs to be Done?
In 2022 we helped write and pass a new law requiring the SRPS to fully and robustly analyze and plan for climate risk in its investments. Thanks to all our allies for this victory! Now, we are focusing our attention on making sure the law is implemented as quickly and fully as possible, working with allies on the SRPS Board, in the General Assembly, and among stakeholders. Join us for details and how you can get involved in keeping Maryland pensions climate safe.