Obligations to consider climate risk in relation to the investments of the Lloyds Bank Pension Scheme No.1 and the Lloyds Bank Pension Scheme No.2

ClientEarth argues that the Lloyds Bank Pension Scheme trustees may be failing their fiduciary duties by not sufficiently addressing climate risk. The letter outlines the material financial risks of climate change, particularly for fossil fuel assets, and the opportunities in the low-carbon transition. It provides a framework for action, including reallocating assets away from coal and high-carbon sectors, adopting TCFD-aligned reporting, and pursuing active stewardship of portfolio companies.

• Pension trustees have a legal fiduciary duty to act in the best interests of members, which includes considering climate change as a material investment risk and evaluating the exposure of both scheme assets and the scheme sponsor to such risks.
• Fossil fuel and carbon-intensive assets face significant financial risks; specifically, 54% of EU coal power assets already have negative cash flow, a figure expected to reach 97% by 2030, and coal operating costs are projected to exceed those of onshore wind by 2024 and solar by 2027.
• Climate-aware investing and the exclusion of high-carbon stocks do not necessarily reduce returns or limit diversification; evidence from the S&P 500 (1926-2017) and MSCI low-carbon indices suggests that excluding high-carbon sectors has a negligible or slightly positive impact on performance compared to benchmarks.
• Current financial market analysis often fails to price climate risk correctly because it relies on short-term forecasts (1 to 3 years) and suffers from a lack of available company data.
• A review of 30 OECD asset owners (excluding the US) indicates emerging market standards for managing climate risk, including the use of data analytics, climate-audits, and divestment policies, with 67% of reviewed asset owners having divestment policies in place.
• ClientEarth recommends specific actions for the scheme to mitigate risk, including ceasing new investment in coal and risky fossil fuels (such as tar sands and arctic exploration), moving passive investments to low-carbon indices, and requiring portfolio companies to align strategies with the Paris agreement.

APA

ClientEarth (2018). Obligations to consider climate risk in relation to the investments of the Lloyds Bank Pension Scheme No.1 and the Lloyds Bank Pension Scheme No.2. https://www.clientearth.org/media/omfnjiwf/lloyds-bank-pension-scheme-legal-letter-ce-en.pdf

Chicago

ClientEarth. Obligations to consider climate risk in relation to the investments of the Lloyds Bank Pension Scheme No.1 and the Lloyds Bank Pension Scheme No.2. 2018. https://www.clientearth.org/media/omfnjiwf/lloyds-bank-pension-scheme-legal-letter-ce-en.pdf.

Wikipedia

{{cite press release |author=ClientEarth |title=Obligations to consider climate risk in relation to the investments of the Lloyds Bank Pension Scheme No.1 and the Lloyds Bank Pension Scheme No.2 |date=10 August 2018 |url=https://www.clientearth.org/media/omfnjiwf/lloyds-bank-pension-scheme-legal-letter-ce-en.pdf |access-date=23 October 2026 |via=Climate Insights Directory}}

BibTeX

@misc{clientearth2018obligations, author = {{ClientEarth}}, title = {{Obligations to consider climate risk in relation to the investments of the Lloyds Bank Pension Scheme No.1 and the Lloyds Bank Pension Scheme No.2}}, publisher = {ClientEarth}, year = {2018}, month = aug, url = {https://www.clientearth.org/media/omfnjiwf/lloyds-bank-pension-scheme-legal-letter-ce-en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }