Key Takeaways
- • Ortec Finance's 2026 Climate Scenarios analysis finds that a 2°C to 3°C temperature increase could reduce long-term pension fund returns by roughly 10% to 30% relative to current expectations.
- • The study examined 180 pension fund portfolios across the UK, US, Canada, Australia, the Netherlands and Switzerland.
- • Australian, Canadian and US schemes face the greatest projected impacts, while Dutch and Swiss funds appear relatively more resilient.
- • Under a high warming scenario of 3.8°C by 2100, global annual growth would fall by about 1.6 percentage points by 2065, leaving the global economy roughly US$58tn smaller than its current trajectory.
- • Ortec Finance argues pension funds must treat climate change as both an asset-level and systemic risk to meet their fiduciary duty, with sovereign debt risk a key concern.
Summary
A temperature increase of 2°C to 3°C could reduce long-term pension fund investment returns by roughly 10% to 30% relative to current expectations, according to an annual report from Ortec Finance. The analysis, based on the 2026 Ortec Finance Climate Scenarios, examined 180 pension fund portfolios across the UK, US, Canada, Australia, the Netherlands and Switzerland.
Under the firm's limited action scenario, which assumes a 2.8°C rise in warming by 2100, returns on pension savings could fall by 10% to 30% by 2050 relative to current expectations. Ortec Finance's high warming scenario, which assumes a 3.8°C increase by the end of the century, would reduce annual global growth by around 1.6 percentage points by 2065, leaving the global economy around US$58tn smaller than its current growth trajectory. The firm said this could affect long-term investment returns and pension fund resilience.
The report found that climate change is expected to affect pension portfolios across all major markets, with Australian, Canadian and US schemes facing the greatest projected impacts. Dutch and Swiss funds appear relatively more resilient. Ortec Finance also said pension schemes need a better understanding of how climate change affects sovereign debt risk, given a broad divergence between the most plausible warming pathway and higher warming scenarios. The research flagged insurance affordability as an early warning sign for investors and warned that climate change could increase sovereign credit risk.
Maurits van Joolingen, managing director of climate scenarios and sustainability at Ortec Finance, said that "to fulfil their fiduciary duty, pension funds must understand climate change as both an asset-level and systemic risk." He added that the wide range of outcomes across the limited action and high warming scenarios shows how climate-related risks can interact, compound and amplify one another. He also said that the climate future many scientists consider plausible "is not a tail-risk scenario" and could have material consequences for sovereign debt markets, insurance systems and pension fund returns.
Under the firm's limited action scenario, which assumes a 2.8°C rise in warming by 2100, returns on pension savings could fall by 10% to 30% by 2050 relative to current expectations. Ortec Finance's high warming scenario, which assumes a 3.8°C increase by the end of the century, would reduce annual global growth by around 1.6 percentage points by 2065, leaving the global economy around US$58tn smaller than its current growth trajectory. The firm said this could affect long-term investment returns and pension fund resilience.
The report found that climate change is expected to affect pension portfolios across all major markets, with Australian, Canadian and US schemes facing the greatest projected impacts. Dutch and Swiss funds appear relatively more resilient. Ortec Finance also said pension schemes need a better understanding of how climate change affects sovereign debt risk, given a broad divergence between the most plausible warming pathway and higher warming scenarios. The research flagged insurance affordability as an early warning sign for investors and warned that climate change could increase sovereign credit risk.
Maurits van Joolingen, managing director of climate scenarios and sustainability at Ortec Finance, said that "to fulfil their fiduciary duty, pension funds must understand climate change as both an asset-level and systemic risk." He added that the wide range of outcomes across the limited action and high warming scenarios shows how climate-related risks can interact, compound and amplify one another. He also said that the climate future many scientists consider plausible "is not a tail-risk scenario" and could have material consequences for sovereign debt markets, insurance systems and pension fund returns.
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