Key Takeaways
- • Meketa's scenario analyses, as reported by New Private Markets, indicate that best-case global warming scenarios would materially affect pension fund valuations and average returns.
- • LACERA, whose portfolio is valued at $74.6 billion, is projected to face a possible 15 percent net asset value drawdown under the modeled climate scenarios, according to publisher context.
- • Investors are beginning to quantify the financial cost of climate risk, but there is no general consensus on how to assess current and future physical risk, raising the risk of mispricing.
- • LACERA sources emissions and other climate-related data from multiple third-party vendors to assess climate-related investment risks.
Summary
New Private Markets reports that LACERA, the Los Angeles County Employees Retirement Association, and other institutional investors have begun calculating the financial cost of climate risks. The analysis centers on scenario work by Meketa, which the publication describes as providing sobering evidence of how even best-case global warming scenarios could affect pension fund valuations and average returns. The full article is behind a registration wall, so the specific methodology and complete findings are not available in the primary text.
Publisher context attached to the story indicates that LACERA's portfolio, currently valued at $74.6 billion, is projected to experience a possible 15 percent net asset value drawdown. The same context notes that LACERA procures emissions and other climate-related data from multiple third-party vendors to assess climate-related investment risks, reflecting an effort to build data-driven inputs into its risk framework.
The broader context in the publisher's related coverage highlights a key challenge for investors. Without a general consensus on how to assess current and future physical risk impacts, there are signs that markets are inefficiently pricing these risks. Related commentary frames climate risk as a financial risk with a fiduciary dimension, and notes that transition risks affect the valuation of investments, including those held by insurers, with direct implications for solvency. Pension investors are also being urged to adopt clear, credible strategies for investing in climate solutions to protect long-term value.
Publisher context attached to the story indicates that LACERA's portfolio, currently valued at $74.6 billion, is projected to experience a possible 15 percent net asset value drawdown. The same context notes that LACERA procures emissions and other climate-related data from multiple third-party vendors to assess climate-related investment risks, reflecting an effort to build data-driven inputs into its risk framework.
The broader context in the publisher's related coverage highlights a key challenge for investors. Without a general consensus on how to assess current and future physical risk impacts, there are signs that markets are inefficiently pricing these risks. Related commentary frames climate risk as a financial risk with a fiduciary dimension, and notes that transition risks affect the valuation of investments, including those held by insurers, with direct implications for solvency. Pension investors are also being urged to adopt clear, credible strategies for investing in climate solutions to protect long-term value.
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