A judicial review is being pursued by ClientEarth who argue the council failed to consider the financial risks climate change poses to future investments
Kensington and Chelsea Council faces a legal challenge after it decided to reduce its employer pension contributions to zero percent last year.
The West London local authority announced plans to stop paying into the scheme for three years because the fund was overachieving. Now a legal challenge, in the form of a judicial review, is being brought against the council — on the grounds that, alongside its pension actuary, it failed to meet public law standards.
ClientEarth, which has brought the legal action, is specifically challenging whether Kensington and Chelsea Council has properly assessed the risk that climate changes pose to the pension fund.
It is widely acknowledged that climate change could have a massive impact on the value of pensions in the future. Experts argue that we are likely to feel the financial implications of climate change before we feel the full force of the physical effects.
This means that the value of investments could drop significantly, as markets start to factor in how climate change may affect the economy.
Mike Clark, Founder Director of investment advisory Ario Advisory, said: “The systemic financial risks of climate change – relevant to pension funds – are more present and dangerous than the Earth Science tipping points which are probably some way off, though very scary.”
The global economy could face a 50 percent loss in GDP between 2070 and 2090 unless immediate policy action on risks posed by the climate crisis is taken, warns a report by the Institute and Faculty of Actuaries (IFoA) .
ClientEarth’s case argues that climate change is a material risk which must be considered when analysing pension fund performances. This is especially true when deciding which level of pension contributions employers make, it argues.
The case could also warn decision-makers that there may be legal risks if they mismanage the financial impacts of climate change.
Alex Bennett, Lawyer at ClientEarth said: “This case gets to the heart of how public pension funds assess climate-related financial risk – one of the biggest risks facing our financial system.
“Local Government Pension Scheme funds carry long-term obligations to their members, and decisions taken today can shape funding resilience for decades.
“ClientEarth is asking the court to review whether Kensington and Chelsea Council, and its actuary Hymans Robertson, met the minimum legal standards required when assessing and explaining climate risk in the 2025 valuation and the related contribution decisions.
“The case is not asking the court to set contribution rates. It is about whether the legal process for assessing material long-term financial risks was followed properly.”
A Kensington and Chelsea Council spokesperson said: “ClientEarth has issued an application for judicial review relating to the administration of the Royal Borough of Kensington and Chelsea Pension Fund.
“The council is considering the matters raised carefully and it would not be appropriate to comment further while this matter is subject to litigation.”
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