Risks and opportunities related to climate change

The changes brought about by climate change pose new risks and provide new opportunities to investors. In practice, this means that the way that companies and governments manage climate change affects the return on investment and risk development of the Church Pension Fund over time. The work on climate change in the Pension Fund is part of the investment strategy and risk management. The central task of the Pension Fund is to ensure that the pensions of the Church employees are also financed in the future.

The economic impacts of climate change on different markets and sectors in the world are multidimensional and vary according to different global warming scenarios. The risks posed by climate change are particularly critical in the sectors of high greenhouse gas emissions, such as utilities, basic industry, and energy.

According to the Task Force on Climate-related Financial Disclosures (TCFD) definition, the risks posed by climate change are divided into transition risks associated with the transition to a low-carbon economy and physical risks due to global warming. Transition risks are related to changes in regulation, technological development, market behaviour and reputational risk. Physical risks are risks directly caused by climate change, and they are divided into acute and chronic risks. The return opportunities brought about by climate change include features such as investment in companies that develop technologies for mitigating climate change or other solutions that facilitate the transition to a low-carbon economy.