The United Nations Joint Staff Pension Fund (UNJSPF) is to examine climate risk in its upcoming asset liability management (ALM) study.
Undertaken every four years, the ALM study looks to provide insight for the fund developing its future strategic asset allocation, with an emphasis on continued risk management to ensure long-term sustainability of the fund.
The decision to take into account climate risk in the fund’s asset liability management was taken at a UNJSPF board meeting hosted in London. The UN will use an outside consultancy for the study.
UNJSPF's decision follows warnings from academics that many pension schemes have so far not yet sufficiently priced in climate risks.
Also discussed at the board meeting was the impact of a financial crisis arising from a failure to transition to net zero. This scenario was considered to be “more challenging” for the fund, and a motivational factor for the fund’s continuing monitoring of the impact of long-term climate risk.
The UNJSPF also confirmed that a 6% nominal rate of return on the fund should be used for an upcoming actuarial valuation at the end of the year. Recent actuarial valuations used an assumption of 3.5%, and according to the fund the upwards revision reflects growing evidence that various global factors, such as climate change will likely lead to lower future long-term investment returns than have been observed in the past.
UNJSPF has faced investment challenges 2022, with assets under management falling in the year from $91.5 billion to $78 billion, amid a challenging market environment. However, as of June 2023, unaudited asset figures recovered to $84.4 billion.
Earlier this year, the UN’s Intergovernmental Panel on Climate Change published a report warning the world it is 'now or never' as it is extremely likely the most ambitious climate targets will be missed.
