Obligations to consider climate risk in relation to the investments of the National Grid UK Pension Scheme

ClientEarth warns the National Grid UK Pension Scheme trustees that treating climate risk merely as part of general ESG issues may be insufficient to meet their legal obligations. The letter outlines material financial risks associated with fossil fuels, the potential for returns from low-carbon investments, and emerging market standards for asset owners. It concludes with a set of recommended actions, including reallocating capital away from coal and high-carbon assets, adopting TCFD-aligned reporting, and pursuing active stewardship of portfolio companies.

• 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.
• Climate-aware investing does not necessarily reduce returns or limit diversification; historical analysis of the S&P 500 from 1926 to 2017 suggests the impact of excluding any of the 10 main market sectors was negligible.
• Current financial market pricing often fails to capture long-term climate risks due to a reliance on short-term forecasts (1 to 3 years) and a lack of available data from companies.
• A review of 30 OECD asset owners indicates that 67% have implemented divestment policies, and investors representing USD 6 trillion in assets have committed to divesting from fossil fuels, with pension funds accounting for half of that amount.
• ClientEarth recommends specific actions for the scheme, including ceasing investment in coal and risky fossil fuel assets (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 National Grid UK Pension Scheme. https://www.clientearth.org/media/04jl0qfq/national-grid-uk-pension-scheme-legal-letter-ce-en.pdf

Chicago

ClientEarth. Obligations to consider climate risk in relation to the investments of the National Grid UK Pension Scheme. 2018. https://www.clientearth.org/media/04jl0qfq/national-grid-uk-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 National Grid UK Pension Scheme |date=10 August 2018 |url=https://www.clientearth.org/media/04jl0qfq/national-grid-uk-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 National Grid UK Pension Scheme}}, publisher = {ClientEarth}, year = {2018}, month = aug, url = {https://www.clientearth.org/media/04jl0qfq/national-grid-uk-pension-scheme-legal-letter-ce-en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }