Climate Scenarios Could Cut Pension Returns 10-30%
Ortec Finance's modelling of 180 pension portfolios links warming pathways to lower long-term retirement returns and weaker sovereign bonds.
Updated on Nov. 9, 2026 in Investing
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Ortec Finance analyzed 180 pension fund portfolios across six major pension systems in the UK, US, Canada, Australia, the Netherlands and Switzerland under several warming scenarios. The report projects pension returns could fall 10 to 30% by 2050 relative to current expectations under the Limited Action scenario, which models 2.8C of warming by 2100.
Why it matters
The findings suggest climate risk could translate directly into lower retirement incomes and weaker government debt values, affecting both pension savers and national finances. The modelling also highlights a gap between pension net-zero commitments and continued support for fossil fuel expansion by many funds.
Ortec Finance modelled 180 pension portfolios, projecting 10 to 30% lower returns by 2050 under 2.8C warming, with Indian sovereign bond values falling about 23%. The scenario outputs are model projections, and the report does not state the precise assumptions behind each sovereign bond estimate.
The players
Ortec Finance
A Dutch financial risk management and investment analytics firm that provides pension fund modelling and asset-liability management services to institutional investors worldwide.
The details
The report models warming scenarios including 2.8C by 2100 under Limited Action and 3.8C under High Warming, and assesses their effects on sovereign debt and pension returns. Under High Warming, Ortec projects Indian sovereign bond values drop around 53% and global GDP reaches only about $156trn by 2065, roughly $58trn below the current growth trajectory.
Timeline
2050: Pension returns could fall 10 to 30% relative to current expectations under the Limited Action scenario.
2065: Global economy projected to reach around $156trn under High Warming.
2100: Warming reaches 2.8C under the Limited Action scenario.
Market Dynamics
The modelled 2.8C pathway sits well above the Paris Agreement's 2C ceiling, so the report quantifies the investment cost of falling short of those targets. Pension returns and sovereign debt values are the transmission channels through which that gap would reach savers and governments.
Savers in pension schemes with heavy fossil fuel exposure could face lower projected returns if the modelled scenarios materialize. Investors holding long-dated government bonds in high-warming-risk economies may also face valuation pressure over time.
The takeaway
Retirement savers can review whether their pension fund publishes climate scenario analysis and how its holdings align with its net-zero commitments. Asking these questions now helps assess long-term return risk that current projections may not fully capture.
Further reading
For more on how these risks reach individual portfolios, see Investing.
Source note: This article includes information reported by Edie.
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