Obligations to consider climate risk in relation to the investments of the Rolls-Royce Pension Scheme

ClientEarth warns the Rolls-Royce Pension Scheme trustees that treating climate risk merely as a general ESG issue may expose them to legal challenges for breach of fiduciary duty. The letter asserts that climate change is a material financial risk, particularly for fossil fuel assets, and that transitioning to low-carbon investments can protect portfolios without sacrificing returns. It provides a detailed framework for action, including reallocating capital away from coal and high-risk fossil fuels, adopting TCFD-aligned reporting, and implementing active stewardship policies to ensure portfolio companies align with the Paris Agreement.

• Trustees have a legal obligation to act in the best interests of members, which includes considering climate change as a material investment risk for both the scheme's assets and its sponsor.
• 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.
• Evidence suggests that excluding high-carbon stocks does not negatively impact returns; MSCI low-carbon indices yielded returns slightly better than the benchmark MSCI ACWI index over a five-year period ending in 2016.
• 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 corporate data.
• A review of 30 OECD asset owners (excluding the US) indicates an emerging market standard where fiduciary duty and long-term risk-adjusted returns drive the integration of climate risk into governance and risk management.
• ClientEarth recommends specific actions for the scheme, including ceasing investment in coal and risky fossil fuels (such as arctic exploration and tar sands), moving passive investments to low-carbon indices, and disclosing risks using the TCFD framework.

APA

ClientEarth (2018). Obligations to consider climate risk in relation to the investments of the Rolls-Royce Pension Scheme. https://www.clientearth.org/media/5denf5my/rolls-royce-pension-scheme-legal-letter-ce-en.pdf

Chicago

ClientEarth. Obligations to consider climate risk in relation to the investments of the Rolls-Royce Pension Scheme. 2018. https://www.clientearth.org/media/5denf5my/rolls-royce-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 Rolls-Royce Pension Scheme |date=10 August 2018 |url=https://www.clientearth.org/media/5denf5my/rolls-royce-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 Rolls-Royce Pension Scheme}}, publisher = {ClientEarth}, year = {2018}, month = aug, url = {https://www.clientearth.org/media/5denf5my/rolls-royce-pension-scheme-legal-letter-ce-en.pdf}, urldate = {2026-10-23}, note = {Indexed by Climate Insights Directory} }