The debate over climate change and its impact on businesses and insurers has been extensive but there are new fears over its impact on pension funds in a world where longevity and how to fund retirement is a growing concern.

This week Ortec Finance published new research into the impact of climate change on the portfolios of 180 leading pension funds in the US, the UK, Canada, the Netherlands, Australia and Switzerland.

It concluded that a failed low-carbon transition could wipe 33% off pension fund returns worldwide by 2050 in a high warming climate scenario that tracks the current trajectory of global warming. The outlook deteriorates further when adjusted for inflation.

Analysis applies to Ortec’s proprietary 2025 climate scenarios to the investment portfolios of 180 pension funds across the six largest global pension systems, revealing the consequences of further delaying the net-zero transition.

“By 2035, performance of the global pension portfolios under high warming scenarios is already worse than under the worst-case transition scenarios, highlighting the catastrophic implications of not transitioning,” says Doruk Onal, climate risk specialist at Ortec Finance.

By 2050, the gap almost completely reverses, with the high warming scenario showing 33% declines compared to only 8% in a delayed net-zero or 4% in a net-zero financial crisis scenario. When inflationary pressures are factored in, the outlook becomes even more concerning, as real returns suffer an even steeper erosion, especially under the high warming scenario.

“This report clearly shows that the immediate costs of transitioning to a low-carbon economy are significantly outweighed by the long-term physical impacts and escalating costs of continued climate inaction. Climate change poses profound risks to global pension funds, but also a clear opportunity: an immediate and coordinated low-carbon transition offers the best long-term outcome. Delay, by contrast, risks stranded assets, higher inflation, and escalating losses. While no single pension fund can shift the global trajectory alone, the collective influence of institutional investors is substantial. Thus, pension funds play a key role in supporting the low-carbon transition for both financial security and societal well-being,” said Maurits van Joolingen the company’s managing director, Climate Scenarios & Sustainability.

It is a stark warning at a time when governments continue to explore ways in which retirement and social care provision can be pushed onto the private sector and the individual.

The scenario of tens of millions of pensions funding that their decades of investment have been left wanting creates a looming reputational and financial crisis.

Jon Guy, Editor,

Emerging Risks