Potential pension fund losses should not deter high-income countries from bold climate action

This paper investigates the distributional effects of stranded fossil fuel assets in high-income countries, arguing that the potential losses to pension funds should not deter bold climate action. The authors combine macroeconomic and financial network data to model stranded asset losses and trace them to ultimate owners. They find that while losses are substantial, they are disproportionately concentrated among the wealthiest, with minimal impact on the overall wealth of the top 1%. However, the lower 50% could face significant hardship, especially in countries with market-based pension systems like the US and UK. The authors conclude that compensating the most vulnerable would be relatively inexpensive compared to other costs of inaction or existing government bailouts.

Gregor Semieniuk, Lucas Chancel, Eulalie Saïsset, Philip B. Holden, Jean-Francois Mercure, Neil R. Edwards