Investments

COP26 and Pensions: What’s the Connection?

You may have heard that COP26 will take place next month. But did you know there is a tie to this global event and your CalPERS pension?

What Is COP26?

COP is short for conference of the parties. Twenty-six is because this is the 26th year of this annual meeting. This year the conference will take place from November 1-12 in Glasgow, Scotland.

The conference will bring together officials from more than 197 countries, along with tens of thousands of negotiators, government representatives, businesses, and citizens all with the purpose of accelerating action toward the goals of the Paris Agreement and the UN Framework Convention on Climate Change (UNFCCC).

How Is COP26 Related to Pensions?

As a global, long-term investor, we understand the impacts climate change has on the performance of our portfolio. We depend on the earnings from our investments to deliver the pension benefits promised to our members. In fact, an estimated 60 cents of every pension dollar paid comes from our investment returns.

So, when climate change creates coastline erosion that shuts hotels or a relentless drought threatens agriculture and food production, our returns are negatively impacted. As responsible investors, we must do our part to make sure these risks are minimized so our returns can be maximized.

Our Priorities at COP26

These risks are why CalPERS will partner with other large investors and pension funds to push for climate change advances during COP26. We’ll advocate for the standardization of climate risk reporting by companies. We also support policy changes to help the transition to net-zero, including ending fossil fuel subsidies and establishing a meaningful price on carbon.

If changes like this are adopted, then the financial markets will be able to further scale up low-carbon financing, everyone will benefit from decreasing emissions, and large investors, including CalPERS, will be able to lessen the impact of climate change to their portfolios.

This is the second article in our “CalPERS on Climate” series. These articles will examine why CalPERS views climate change as an investment issue and detail our efforts in the sustainable investment space.