The financial argument for a climate-safe retirement fund

A climate-safe retirement fund doesn’t mean low returns. Here’s why.

Annie Sartor
April 6, 2022
Two men working together in an office

If you’re considering advocating for your company to provide a climate-safe retirement option, the first question you will likely encounter is whether climate-safe investments make financial sense.

There is substantial research affirming that climate-safe investments make good financial sense and that the world's largest asset managers, including BlackRock, Vanguard and Fidelity, should offer climate-safe indexes as default retirement products, both to protect the climate and for the strongest returns for retail investors.

We’ve pulled together some further reading to demonstrate climate-safe funds, and the risks associated with ignoring such investments.  

Alternative investments that screen for climate criteria have not had a negative financial return 

Ignoring climate risk will have a negative impact on financial returns 

  • In his 2020 Letter to CEOs, BlackRock Chairman and CEO Larry Fink warned that “Climate Risk is Investment Risk: Our investment conviction is that sustainability - and climate-integrated portfolios can provide better risk-adjusted returns to investors. And with the impact of sustainability on investment returns increasing, we believe that sustainable investing is the strongest foundation for client portfolios going forward.”
  • Swiss Re 2021 Report found that “climate change poses the biggest long-term risk to the global economy,” and “Climate Change Could Cut World Economy by $23Trillion in 2050”
  • Board of Governors of the Federal Reserve System 2021 note: “Climate change-related financial risks pose both micro- and macro-prudential concerns…” 
  • David Comerford and Alessandro Spiganti, authors of The Carbon Bubble paper: “Credible implementation of climate change policy, consistent with the 2°C limit, requires a large proportion of current fossil fuel reserves to remain unused.This issue, named the Carbon Bubble, is usually presented as a required asset write-off, with implications for investors… if investors are leveraged, the Carbon Bubble may precipitate a fire-sale of assets across the economy, and generate a large and persistent fall in output and investment.” 

Research pulled from: 

Join the WorkForClimateAcademy, our new 10-week cohort program designed to help you take significant climate action in your workplace. Full details and registration information here.

Feature photo by LinkedIn Sales Solutions via Unsplash.

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