Pensions in the age of radical climate change
How should we hold pension managers accountable in an age of extreme risk?
The extreme heat waves that kicked off the year in India and now are ravaging Europe and the Western United States have me thinking about pensions. Specifically, given that the world’s largest investors are using the assets of pension funds and sovereign funds to steer the global economy, how should we be thinking about their fiduciary duty in an age of extreme climate change?
I was taught to think about pensions as a tool to enable a worker to ensure a comfortable retirement. To do so, pension funds take the monthly deposit of that worker and invest it into the economy in a way that will grow the value of that worker’s investment. That way, the worker will have more to live on after they stop working than if they’d just put their money under their mattress.
But this assumes a ceteris paribus world — the economics term for ‘a world where everything is more or less the same as it is now.’ Meaning, this simple formulation of pensions as a tool for growing savings for retirement presumes that the money will be worth something when the worker retires. It also presumes that the world in which the worker retires will enable a comfortable enough life if only they have the money the worker earned.
