Trillion Dollar Transformation: Fiduciary Duty, Divestment, and Fossil Fuels in an Era of Climate Risk

Trillion Dollar Transformation CIEL
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Trillion Dollar Transformation is a collaborative initiative by Mercer and the Center for International Environmental Law (CIEL) which seeks to educate pension fund fiduciaries on the financial and legal challenges climate change presents, and equip them with the information and tools to respond.

Mercer’s economic analysis demonstrates that, regardless of the response scenario, climate change will impact pension fund returns, with the biggest impacts experienced in climate vulnerable sectors such as fossil fuels. CIEL’s legal analysis – featured here – builds on these findings and concludes that the nature and extent of the financial risks posed by climate change implicate several fiduciary duties owed by pension fund trustees to fund beneficiaries. Failure to acknowledge and address the financial risks posed by climate change may result in a breach of one or more of these duties with potential liabilities in addition to financial losses.

Just as it presents a threat unlike any humankind has faced before, climate change presents a financial challenge unlike any we have yet seen. Pension fund trustees must acknowledge these risks and prepare for unprecedented market changes in major sectors of the global economy. A failure to do so could expose their funds to severe losses and themselves to liability. Fortunately, pension fund trustees have the notice and the opportunity to address these risks in their portfolios, and can confidently navigate this new future with care, skill, and caution.

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