The financial argument for a climate-safe retirement fund

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

Annie Sartor
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.

https://www.workforclimate.org/post/the-financial-argument-for-a-climate-safe-retirement-fund
Copy link

Subscribe Today

Register your details to receive our weekly newsletter containing advice and strategies to help your company take climate action.

Thank you! Your submission has been received!
Oops! Something went wrong while submitting the form.