The changes resulting from climate change represent new risks and opportunities for investors. In practice, this means that the efforts of companies and states to control climate change will have a gradual impact on the return and risk development of the Church Pension Fund’s investment operations. Climate change work is an integral part of risk management within the Church Pension Fund's investment operations. The key task of the Church Pension Fund is to ensure the payment of pensions to Church employees, now and in the future.
The financial impacts of climate change on global markets and sectors are multidimensional and vary along with the different global warming scenarios. The risks induced by climate change are especially critical in sectors with high greenhouse gas emissions, such as utilities, basic industries and energy production. The climate impacts are significant also in the agriculture and forestry sectors as well.
As an owner and investor, the Church Pension Fund wants to encourage companies to address climate change in a suitable manner for their own business operations. As a signatory of the Carbon Disclosure Project (CDP), the Church Pension Fund is involved in encouraging companies all over the world to report on their own climate change efforts. Comprehensive reporting provides the Church Pension Fund with better investment analyses of a company’s actual profit and risk prospects and of the commitment of company management to long-term climate change development.
The goal of the Church Pension Fund is to consistently reduce the carbon footprint of its investment operations. In November 2015, the Church Pension Fund signed the investors' Montréal Carbon Pledge. By participating in the initiative, the Church Pension Fund pledges to report annually on the carbon footprint of its investments.
In order to reduce the carbon footprint of its investment operations, the Church Pension Fund has identified a set of climate change tools. The applicable tools and their uses vary in accordance with the different asset classes.
The primary tools of the Church Pension Fund include the ESG analysis (A.) and engagement activities (B.), which can be used in all asset classes. Green investments (C.) also play a key role, since they are necessary for the development of new low-carbon solutions within different sectors and form the so-called positive carbon handprint. Carbon reporting (D.) provides the Church Pension Fund with an up-to-date picture of the climate risks of its investments. Exclusion criteria (E.) in fossil fuel investments reduce the Church Pension Fund’s carbon risk in direct equity investments and serve as a basis for discourse with asset managers. Low-carbon index products (F.) are noteworthy options in terms of passive equity investments.